Correlation Between Direxion Monthly and Eventide Limited

Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Eventide Limited 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 Monthly and Eventide Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion Monthly Nasdaq 100 and Eventide Limited Term Bond, you can compare the effects of market volatilities on Direxion Monthly and Eventide Limited 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 Monthly with a short position of Eventide Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Eventide Limited.

Diversification Opportunities for Direxion Monthly and Eventide Limited

-0.41

Correlation Coefficient

Direxion Monthly  Eventide Limited

Very good diversification

The 3 months correlation between Direxion and Eventide is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Eventide Limited Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Limited Term and Direxion Monthly 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 Monthly Nasdaq 100 are associated (or correlated) with Eventide Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Limited Term has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Eventide Limited go up and down completely randomly.

Pair Corralation between Direxion Monthly and Eventide Limited

Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to generate 17.84 times more return on investment than Eventide Limited. However, Direxion Monthly is 17.84 times more volatile than Eventide Limited Term Bond. It trades about 0.1 of its potential returns per unit of risk. Eventide Limited Term Bond is currently generating about -0.27 per unit of risk. If you would invest  9,081  in Direxion Monthly Nasdaq 100 on September 24, 2024 and sell it today you would earn a total of  339.00  from holding Direxion Monthly Nasdaq 100 or generate 3.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Direxion Monthly Nasdaq 100  vs.  Eventide Limited Term Bond

Direxion Monthly Nasdaq

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Monthly Nasdaq 100 are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Direxion Monthly may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Eventide Limited Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eventide Limited Term Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Eventide Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Monthly and Eventide Limited

The main advantage of trading using opposite Direxion Monthly and Eventide Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Monthly position performs unexpectedly, Eventide Limited 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 Eventide Limited will offset losses from the drop in Eventide Limited's long position.

The idea behind Direxion Monthly Nasdaq 100 and Eventide Limited Term Bond 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.

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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.