Correlation Between Ambev SA and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Ambev SA 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 Ambev SA and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambev SA ADR and Merit Medical Systems, you can compare the effects of market volatilities on Ambev SA 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 Ambev SA with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and Merit Medical.
Diversification Opportunities for Ambev SA and Merit Medical
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ambev and Merit is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR 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 Ambev SA 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 Ambev SA ADR 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 Ambev SA i.e., Ambev SA and Merit Medical go up and down completely randomly.
Pair Corralation between Ambev SA and Merit Medical
Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Merit Medical. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.09 times less risky than Merit Medical. The stock trades about -0.04 of its potential returns per unit of risk. The Merit Medical Systems is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8,426 in Merit Medical Systems on August 31, 2024 and sell it today you would earn a total of 1,964 from holding Merit Medical Systems or generate 23.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambev SA ADR vs. Merit Medical Systems
Performance |
| Timeline |
| Ambev SA ADR |
| Merit Medical Systems |
Ambev SA and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambev SA and Merit Medical
The main advantage of trading using opposite Ambev SA and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA 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.| Ambev SA vs. Fomento Economico Mexicano | Ambev SA vs. Boston Beer | Ambev SA vs. Carlsberg AS | Ambev SA vs. Compania Cervecerias Unidas |
| Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies, | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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