Correlation Between Direxion Daily and BlackRock Long

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

By analyzing existing cross correlation between Direxion Daily NVDA and BlackRock Long Term Equity, you can compare the effects of market volatilities on Direxion Daily and BlackRock Long 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 BlackRock Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and BlackRock Long.

Diversification Opportunities for Direxion Daily and BlackRock Long

0.71

Correlation Coefficient

Direxion Daily  BlackRock Long

Poor diversification

The 3 months correlation between Direxion and BlackRock is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and BlackRock Long Term Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Long Term 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 NVDA are associated (or correlated) with BlackRock Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Long Term has no effect on the direction of Direxion Daily i.e., Direxion Daily and BlackRock Long go up and down completely randomly.

Pair Corralation between Direxion Daily and BlackRock Long

Given the investment horizon of 90 days Direxion Daily NVDA is expected to generate 5.8 times more return on investment than BlackRock Long. However, Direxion Daily is 5.8 times more volatile than BlackRock Long Term Equity. It trades about 0.16 of its potential returns per unit of risk. BlackRock Long Term Equity is currently generating about 0.14 per unit of risk. If you would invest  7,573  in Direxion Daily NVDA on September 3, 2024 and sell it today you would earn a total of  4,040  from holding Direxion Daily NVDA or generate 53.35% return on investment over 90 days.

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

Direxion Daily NVDA  vs.  BlackRock Long Term Equity

Direxion Daily NVDA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily NVDA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

BlackRock Long Term

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Long Term Equity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, BlackRock Long may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Direxion Daily and BlackRock Long

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

The idea behind Direxion Daily NVDA and BlackRock Long Term Equity 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.