Correlation Between Emerson Electric and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Emerson Electric 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 Emerson Electric and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Electric and Merit Medical Systems, you can compare the effects of market volatilities on Emerson Electric 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 Emerson Electric with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Electric and Merit Medical.
Diversification Opportunities for Emerson Electric and Merit Medical
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerson and Merit is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Electric 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 Emerson Electric 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 Emerson Electric 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 Emerson Electric i.e., Emerson Electric and Merit Medical go up and down completely randomly.
Pair Corralation between Emerson Electric and Merit Medical
Considering the 90-day investment horizon Emerson Electric is expected to generate 1.63 times more return on investment than Merit Medical. However, Emerson Electric is 1.63 times more volatile than Merit Medical Systems. It trades about 0.4 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.29 per unit of risk. If you would invest 10,857 in Emerson Electric on August 31, 2024 and sell it today you would earn a total of 2,402 from holding Emerson Electric or generate 22.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Electric vs. Merit Medical Systems
Performance |
| Timeline |
| Emerson Electric |
| Merit Medical Systems |
Emerson Electric and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Electric and Merit Medical
The main advantage of trading using opposite Emerson Electric and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Electric 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.| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |