Correlation Between Direxion Daily and Neuberger Berman

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Neuberger Berman at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Direxion Daily and Neuberger Berman into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion Daily SP and Neuberger Berman ETF, you can compare the effects of market volatilities on Direxion Daily and Neuberger Berman and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Direxion Daily with a short position of Neuberger Berman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Neuberger Berman.

Diversification Opportunities for Direxion Daily and Neuberger Berman

0.6

Correlation Coefficient

Direxion Daily  Neuberger Berman

Poor diversification

The 3 months correlation between Direxion and Neuberger is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and Neuberger Berman ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuberger Berman ETF and Direxion Daily is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Direxion Daily SP are associated (or correlated) with Neuberger Berman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuberger Berman ETF has no effect on the direction of Direxion Daily i.e., Direxion Daily and Neuberger Berman go up and down completely randomly.

Pair Corralation between Direxion Daily and Neuberger Berman

Given the investment horizon of 90 days Direxion Daily SP is expected to under-perform the Neuberger Berman. In addition to that, Direxion Daily is 3.69 times more volatile than Neuberger Berman ETF. It trades about -0.09 of its total potential returns per unit of risk. Neuberger Berman ETF is currently generating about -0.03 per unit of volatility. If you would invest  2,898  in Neuberger Berman ETF on September 4, 2024 and sell it today you would lose (45.00) from holding Neuberger Berman ETF or give up 1.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Direxion Daily SP  vs.  Neuberger Berman ETF

Direxion Daily SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily SP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Etf's forward indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Neuberger Berman ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neuberger Berman ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Neuberger Berman is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Direxion Daily and Neuberger Berman

The main advantage of trading using opposite Direxion Daily and Neuberger Berman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Neuberger Berman can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Neuberger Berman will offset losses from the drop in Neuberger Berman's long position.

The idea behind Direxion Daily SP and Neuberger Berman ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..