Correlation Between Direxion Auspice and California Municipal

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

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

Diversification Opportunities for Direxion Auspice and California Municipal

-0.42

Correlation Coefficient

Direxion Auspice  California Municipal

Very good diversification

The 3 months correlation between Direxion and California is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Auspice Broad and California Municipal Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Municipal and Direxion Auspice 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 Auspice Broad are associated (or correlated) with California Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Municipal has no effect on the direction of Direxion Auspice i.e., Direxion Auspice and California Municipal go up and down completely randomly.

Pair Corralation between Direxion Auspice and California Municipal

Considering the 90-day investment horizon Direxion Auspice is expected to generate 4.71 times less return on investment than California Municipal. In addition to that, Direxion Auspice is 3.21 times more volatile than California Municipal Portfolio. It trades about 0.02 of its total potential returns per unit of risk. California Municipal Portfolio is currently generating about 0.25 per unit of volatility. If you would invest  1,315  in California Municipal Portfolio on January 25, 2024 and sell it today you would earn a total of  60.00  from holding California Municipal Portfolio or generate 4.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Direxion Auspice Broad  vs.  California Municipal Portfolio

Direxion Auspice Broad

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Auspice Broad are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Direxion Auspice is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

California Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Municipal Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, California Municipal 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 Auspice and California Municipal

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

The idea behind Direxion Auspice Broad and California Municipal Portfolio 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.