Correlation Between Direxion Daily and Nicholas Global

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Nicholas Global 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 Nicholas Global 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 Nicholas Global Equity, you can compare the effects of market volatilities on Direxion Daily and Nicholas Global 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 Nicholas Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Nicholas Global.

Diversification Opportunities for Direxion Daily and Nicholas Global

0.74

Correlation Coefficient

Direxion Daily  Nicholas Global

Poor diversification

The 3 months correlation between Direxion and Nicholas is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and Nicholas Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Global Equity 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 Nicholas Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Global Equity has no effect on the direction of Direxion Daily i.e., Direxion Daily and Nicholas Global go up and down completely randomly.

Pair Corralation between Direxion Daily and Nicholas Global

Given the investment horizon of 90 days Direxion Daily NVDA is expected to under-perform the Nicholas Global. In addition to that, Direxion Daily is 9.86 times more volatile than Nicholas Global Equity. It trades about -0.15 of its total potential returns per unit of risk. Nicholas Global Equity is currently generating about -0.02 per unit of volatility. If you would invest  1,971  in Nicholas Global Equity on September 12, 2024 and sell it today you would lose (4.00) from holding Nicholas Global Equity or give up 0.2% of portfolio value over 90 days.

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

Direxion Daily NVDA  vs.  Nicholas Global Equity

Direxion Daily NVDA

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily NVDA are ranked lower than 6 (%) 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.

Nicholas Global Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nicholas Global Equity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Nicholas Global 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 Daily and Nicholas Global

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

The idea behind Direxion Daily NVDA and Nicholas Global 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.