Correlation Between Global X and Direxion

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

By analyzing existing cross correlation between Global X NASDAQ and Direxion, you can compare the effects of market volatilities on Global X and Direxion 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 Global X with a short position of Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Direxion.

Diversification Opportunities for Global X and Direxion

-0.81

Correlation Coefficient

Global X  Direxion

Pay attention - limited upside

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

Pair Corralation between Global X and Direxion

Given the investment horizon of 90 days Global X NASDAQ is expected to generate 0.14 times more return on investment than Direxion. However, Global X NASDAQ is 7.4 times less risky than Direxion. It trades about 0.13 of its potential returns per unit of risk. Direxion is currently generating about -0.01 per unit of risk. If you would invest  1,262  in Global X NASDAQ on September 22, 2024 and sell it today you would earn a total of  593.00  from holding Global X NASDAQ or generate 46.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	16.94%
Values	Daily Returns

Global X NASDAQ  vs.  Direxion

Global X NASDAQ

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X NASDAQ are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Direxion is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Global X and Direxion

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

The idea behind Global X NASDAQ and Direxion 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 CEOs Directory module to screen CEOs from public companies around the world.