Correlation Between Merck and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Merck 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 Merck and Direxion 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 Direxion Daily Small, you can compare the effects of market volatilities on Merck 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 Merck with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Direxion Daily.
Diversification Opportunities for Merck and Direxion Daily
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merck and Direxion is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Direxion Daily Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Small 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 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 Small has no effect on the direction of Merck i.e., Merck and Direxion Daily go up and down completely randomly.
Pair Corralation between Merck and Direxion Daily
Considering the 90-day investment horizon Merck Company is expected to under-perform the Direxion Daily. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 2.9 times less risky than Direxion Daily. The stock trades about -0.05 of its potential returns per unit of risk. The Direxion Daily Small is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,401 in Direxion Daily Small on August 28, 2024 and sell it today you would earn a total of 2,224 from holding Direxion Daily Small or generate 65.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Direxion Daily Small
Performance |
| Timeline |
| Merck Company |
| Direxion Daily Small |
Merck and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Direxion Daily
The main advantage of trading using opposite Merck and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck 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.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| Direxion Daily vs. Direxion Daily Small | Direxion Daily vs. Direxion Daily Financial | Direxion Daily vs. Direxion Daily Energy | Direxion Daily vs. Direxion Daily SP500 |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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