Correlation Between Fisher Small and Direxion Monthly

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

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

Diversification Opportunities for Fisher Small and Direxion Monthly

0.9

Correlation Coefficient

Fisher Small  Direxion Monthly

Almost no diversification

The 3 months correlation between Fisher and Direxion is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fisher Small Cap and Direxion Monthly Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Monthly Nasdaq and Fisher Small 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 Fisher Small Cap are associated (or correlated) with Direxion Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Monthly Nasdaq has no effect on the direction of Fisher Small i.e., Fisher Small and Direxion Monthly go up and down completely randomly.

Pair Corralation between Fisher Small and Direxion Monthly

Assuming the 90 days horizon Fisher Small Cap is expected to under-perform the Direxion Monthly. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fisher Small Cap is 1.07 times less risky than Direxion Monthly. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Direxion Monthly Nasdaq 100 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  8,196  in Direxion Monthly Nasdaq 100 on September 12, 2024 and sell it today you would earn a total of  302.00  from holding Direxion Monthly Nasdaq 100 or generate 3.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Fisher Small Cap  vs.  Direxion Monthly Nasdaq 100

Fisher Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fisher Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fisher Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Direxion Monthly Nasdaq

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Monthly Nasdaq 100 are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady essential indicators, Direxion Monthly showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fisher Small and Direxion Monthly

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

The idea behind Fisher Small Cap and Direxion Monthly Nasdaq 100 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.