Correlation Between Merck and Defiance Daily
Can any of the company-specific risk be diversified away by investing in both Merck and Defiance 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 Merck and Defiance Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Defiance Daily Target, you can compare the effects of market volatilities on Merck and Defiance 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 Merck with a short position of Defiance Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Defiance Daily.
Diversification Opportunities for Merck and Defiance Daily
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merck and Defiance is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Defiance Daily Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Daily Target and Merck 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 Merck Company are associated (or correlated) with Defiance Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Daily Target has no effect on the direction of Merck i.e., Merck and Defiance Daily go up and down completely randomly.
Pair Corralation between Merck and Defiance Daily
Considering the 90-day investment horizon Merck Company is expected to generate 0.07 times more return on investment than Defiance Daily. However, Merck Company is 14.85 times less risky than Defiance Daily. It trades about 0.01 of its potential returns per unit of risk. Defiance Daily Target is currently generating about -0.01 per unit of risk. If you would invest 10,164 in Merck Company on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Merck Company or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 26.77% |
| Values | Daily Returns |
Merck Company vs. Defiance Daily Target
Performance |
| Timeline |
| Merck Company |
| Defiance Daily Target |
Merck and Defiance Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Defiance Daily
The main advantage of trading using opposite Merck and Defiance Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Defiance 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 Defiance Daily will offset losses from the drop in Defiance Daily's long position.The idea behind Merck Company and Defiance Daily Target 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.| Defiance Daily vs. Tidal Trust II | Defiance Daily vs. Tidal Trust II | Defiance Daily vs. Direxion Daily META | Defiance Daily vs. Direxion Daily META |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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