Correlation Between Direxion Auspice and ADTRAN

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

Diversification Opportunities for Direxion Auspice and ADTRAN

-0.89

Correlation Coefficient

Direxion Auspice  ADTRAN

Pay attention - limited upside

The 3 months correlation between Direxion and ADTRAN is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Auspice Broad and ADTRAN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADTRAN Inc 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 ADTRAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADTRAN Inc has no effect on the direction of Direxion Auspice i.e., Direxion Auspice and ADTRAN go up and down completely randomly.

Pair Corralation between Direxion Auspice and ADTRAN

Considering the 90-day investment horizon Direxion Auspice Broad is expected to generate 0.25 times more return on investment than ADTRAN. However, Direxion Auspice Broad is 4.0 times less risky than ADTRAN. It trades about 0.34 of its potential returns per unit of risk. ADTRAN Inc is currently generating about -0.18 per unit of risk. If you would invest  2,807  in Direxion Auspice Broad on January 26, 2024 and sell it today you would earn a total of  117.00  from holding Direxion Auspice Broad or generate 4.17% return on investment over 90 days.

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

Direxion Auspice Broad  vs.  ADTRAN Inc

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 recent stock price disarray, may contribute to short-term losses for the investors.

ADTRAN Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADTRAN Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Direxion Auspice and ADTRAN

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

The idea behind Direxion Auspice Broad and ADTRAN Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.