Correlation Between Nio and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Nio and Direxion Daily 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 Nio and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nio Class A and Direxion Daily Junior, you can compare the effects of market volatilities on Nio and Direxion Daily 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 Nio with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Direxion Daily.
Diversification Opportunities for Nio and Direxion Daily
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nio and Direxion is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Direxion Daily Junior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Junior and Nio 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 Nio Class A are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Junior has no effect on the direction of Nio i.e., Nio and Direxion Daily go up and down completely randomly.
Pair Corralation between Nio and Direxion Daily
Considering the 90-day investment horizon Nio Class A is expected to under-perform the Direxion Daily. In addition to that, Nio is 1.02 times more volatile than Direxion Daily Junior. It trades about -0.05 of its total potential returns per unit of risk. Direxion Daily Junior is currently generating about 0.01 per unit of volatility. If you would invest 4,071 in Direxion Daily Junior on January 21, 2024 and sell it today you would lose (235.00) from holding Direxion Daily Junior or give up 5.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Nio Class A vs. Direxion Daily Junior
Performance |
| Timeline |
| Nio Class A |
| Direxion Daily Junior |
Nio and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nio and Direxion Daily
The main advantage of trading using opposite Nio and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio position performs unexpectedly, Direxion Daily 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 Daily will offset losses from the drop in Direxion Daily's long position.The idea behind Nio Class A and Direxion Daily Junior 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.| Direxion Daily vs. Direxion Daily Junior | Direxion Daily vs. Direxion Daily Gold | Direxion Daily vs. Direxion Daily Gold | Direxion Daily vs. Direxion Daily SP |
Check out your portfolio center.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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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