Correlation Between Direxion Daily and ClearBridge Sustainable

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

Diversification Opportunities for Direxion Daily and ClearBridge Sustainable

-0.81

Correlation Coefficient

Direxion Daily  ClearBridge Sustainable

Pay attention - limited upside

The 3 months correlation between Direxion and ClearBridge is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and ClearBridge Sustainable Infras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearBridge Sustainable 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 ClearBridge Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearBridge Sustainable has no effect on the direction of Direxion Daily i.e., Direxion Daily and ClearBridge Sustainable go up and down completely randomly.

Pair Corralation between Direxion Daily and ClearBridge Sustainable

Given the investment horizon of 90 days Direxion Daily NVDA is expected to generate 7.79 times more return on investment than ClearBridge Sustainable. However, Direxion Daily is 7.79 times more volatile than ClearBridge Sustainable Infrastructure. It trades about 0.0 of its potential returns per unit of risk. ClearBridge Sustainable Infrastructure is currently generating about 0.03 per unit of risk. If you would invest  12,644  in Direxion Daily NVDA on September 13, 2024 and sell it today you would lose (2,847) from holding Direxion Daily NVDA or give up 22.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Direxion Daily NVDA  vs.  ClearBridge Sustainable Infras

Direxion Daily NVDA

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily NVDA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

ClearBridge Sustainable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ClearBridge Sustainable Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with Direxion Daily and ClearBridge Sustainable

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

The idea behind Direxion Daily NVDA and ClearBridge Sustainable Infrastructure 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.