Correlation Between Direxion Daily and North Media

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

By analyzing existing cross correlation between Direxion Daily SP500 and North Media AS, you can compare the effects of market volatilities on Direxion Daily and North Media 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 North Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and North Media.

Diversification Opportunities for Direxion Daily and North Media

-0.48

Correlation Coefficient

Direxion Daily  North Media

Very good diversification

The 3 months correlation between Direxion and North is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP500 and North Media AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Media AS 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 SP500 are associated (or correlated) with North Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Media AS has no effect on the direction of Direxion Daily i.e., Direxion Daily and North Media go up and down completely randomly.

Pair Corralation between Direxion Daily and North Media

Given the investment horizon of 90 days Direxion Daily SP500 is expected to generate 1.29 times more return on investment than North Media. However, Direxion Daily is 1.29 times more volatile than North Media AS. It trades about 0.1 of its potential returns per unit of risk. North Media AS is currently generating about 0.03 per unit of risk. If you would invest  6,541  in Direxion Daily SP500 on January 25, 2024 and sell it today you would earn a total of  5,410  from holding Direxion Daily SP500 or generate 82.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.62%
Values	Daily Returns

Direxion Daily SP500  vs.  North Media AS

Direxion Daily SP500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in May 2024.

North Media AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Media AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Direxion Daily and North Media

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

The idea behind Direxion Daily SP500 and North Media AS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.