Correlation Between Ares Management and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Ares Management and Merit Medical 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 Ares Management and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management Corp and Merit Medical Systems, you can compare the effects of market volatilities on Ares Management and Merit Medical 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 Ares Management with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Merit Medical.
Diversification Opportunities for Ares Management and Merit Medical
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ares and Merit is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Merit Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merit Medical Systems and Ares Management 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 Ares Management Corp are associated (or correlated) with Merit Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merit Medical Systems has no effect on the direction of Ares Management i.e., Ares Management and Merit Medical go up and down completely randomly.
Pair Corralation between Ares Management and Merit Medical
Assuming the 90 days horizon Ares Management Corp is expected to generate 1.46 times more return on investment than Merit Medical. However, Ares Management is 1.46 times more volatile than Merit Medical Systems. It trades about 0.06 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.04 per unit of risk. If you would invest 12,406 in Ares Management Corp on December 10, 2024 and sell it today you would earn a total of 1,728 from holding Ares Management Corp or generate 13.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management Corp vs. Merit Medical Systems
Performance |
| Timeline |
| Ares Management Corp |
| Merit Medical Systems |
Ares Management and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Merit Medical
The main advantage of trading using opposite Ares Management and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Merit Medical 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 Merit Medical will offset losses from the drop in Merit Medical's long position.| Ares Management vs. SENECA FOODS A | Ares Management vs. Moneysupermarket Group PLC | Ares Management vs. MAVEN WIRELESS SWEDEN | Ares Management vs. Office Properties Income |
| Merit Medical vs. STRAYER EDUCATION | Merit Medical vs. Grand Canyon Education | Merit Medical vs. Zijin Mining Group | Merit Medical vs. Stag Industrial |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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