Correlation Between Direxion Monthly and Pear Tree

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

By analyzing existing cross correlation between Direxion Monthly Nasdaq 100 and Pear Tree Polaris, you can compare the effects of market volatilities on Direxion Monthly and Pear Tree 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 Monthly with a short position of Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Pear Tree.

Diversification Opportunities for Direxion Monthly and Pear Tree

0.94

Correlation Coefficient

Direxion Monthly  Pear Tree

Almost no diversification

The 3 months correlation between Direxion and Pear is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris and Direxion Monthly 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 Monthly Nasdaq 100 are associated (or correlated) with Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Pear Tree go up and down completely randomly.

Pair Corralation between Direxion Monthly and Pear Tree

Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to generate 2.27 times more return on investment than Pear Tree. However, Direxion Monthly is 2.27 times more volatile than Pear Tree Polaris. It trades about 0.23 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about 0.16 per unit of risk. If you would invest  8,147  in Direxion Monthly Nasdaq 100 on May 5, 2025 and sell it today you would earn a total of  1,920  from holding Direxion Monthly Nasdaq 100 or generate 23.57% return on investment over 90 days.

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

Direxion Monthly Nasdaq 100  vs.  Pear Tree Polaris

Direxion Monthly Nasdaq

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Monthly Nasdaq 100 are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Direxion Monthly showed solid returns over the last few months and may actually be approaching a breakup point.

Pear Tree Polaris

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pear Tree Polaris are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pear Tree may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Direxion Monthly and Pear Tree

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

The idea behind Direxion Monthly Nasdaq 100 and Pear Tree Polaris 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.