Correlation Between Pfizer and Direxion Daily

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

By analyzing existing cross correlation between Pfizer Inc and Direxion Daily FTSE, you can compare the effects of market volatilities on Pfizer 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 Pfizer with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Direxion Daily.

Diversification Opportunities for Pfizer and Direxion Daily

0.87

Correlation Coefficient

Pfizer  Direxion Daily

Very poor diversification

The 3 months correlation between Pfizer and Direxion is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Direxion Daily FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily FTSE and Pfizer 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 Pfizer Inc 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 FTSE has no effect on the direction of Pfizer i.e., Pfizer and Direxion Daily go up and down completely randomly.

Pair Corralation between Pfizer and Direxion Daily

Considering the 90-day investment horizon Pfizer Inc is expected to generate 0.56 times more return on investment than Direxion Daily. However, Pfizer Inc is 1.79 times less risky than Direxion Daily. It trades about -0.08 of its potential returns per unit of risk. Direxion Daily FTSE is currently generating about -0.1 per unit of risk. If you would invest  2,787  in Pfizer Inc on September 3, 2024 and sell it today you would lose (205.00) from holding Pfizer Inc or give up 7.36% of portfolio value over 90 days.

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

Pfizer Inc  vs.  Direxion Daily FTSE

Pfizer Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Direxion Daily FTSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily FTSE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with Pfizer and Direxion Daily

The main advantage of trading using opposite Pfizer and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer 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 Pfizer Inc and Direxion Daily FTSE 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.