Correlation Between Direxion Daily and Merck
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Merck 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 Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily FTSE and Merck Company, you can compare the effects of market volatilities on Direxion Daily and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Merck.
Diversification Opportunities for Direxion Daily and Merck
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and Merck is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily FTSE and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 FTSE are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Direxion Daily i.e., Direxion Daily and Merck go up and down completely randomly.
Pair Corralation between Direxion Daily and Merck
Given the investment horizon of 90 days Direxion Daily FTSE is expected to generate 1.89 times more return on investment than Merck. However, Direxion Daily is 1.89 times more volatile than Merck Company. It trades about 0.0 of its potential returns per unit of risk. Merck Company is currently generating about -0.06 per unit of risk. If you would invest 2,273 in Direxion Daily FTSE on August 29, 2024 and sell it today you would lose (122.00) from holding Direxion Daily FTSE or give up 5.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily FTSE vs. Merck Company
Performance |
| Timeline |
| Direxion Daily FTSE |
| Merck Company |
Direxion Daily and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Merck
The main advantage of trading using opposite Direxion Daily and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| Direxion Daily vs. ABIVAX Socit Anonyme | Direxion Daily vs. Morningstar Unconstrained Allocation | Direxion Daily vs. SPACE | Direxion Daily vs. Knife River |
| Merck vs. Pharvaris BV | Merck vs. Brinker International | Merck vs. Alcoa Corp | Merck vs. Direxion Daily FTSE |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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