Correlation Between Diageo PLC and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Diageo PLC 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 Diageo PLC and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC ADR and Merit Medical Systems, you can compare the effects of market volatilities on Diageo PLC 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 Diageo PLC with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Merit Medical.
Diversification Opportunities for Diageo PLC and Merit Medical
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Diageo and Merit is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC 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 Diageo PLC 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 Diageo PLC 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 Diageo PLC i.e., Diageo PLC and Merit Medical go up and down completely randomly.
Pair Corralation between Diageo PLC and Merit Medical
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Merit Medical. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.15 times less risky than Merit Medical. The stock trades about -0.33 of its potential returns per unit of risk. The Merit Medical Systems is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 9,590 in Merit Medical Systems on August 30, 2024 and sell it today you would earn a total of 776.00 from holding Merit Medical Systems or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Merit Medical Systems
Performance |
| Timeline |
| Diageo PLC ADR |
| Merit Medical Systems |
Diageo PLC and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Merit Medical
The main advantage of trading using opposite Diageo PLC and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC 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.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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