Correlation Between Global E and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Global E 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 Global E and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Online and Merit Medical Systems, you can compare the effects of market volatilities on Global E 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 Global E with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and Merit Medical.
Diversification Opportunities for Global E and Merit Medical
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Merit is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online 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 Global E 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 Global E Online 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 Global E i.e., Global E and Merit Medical go up and down completely randomly.
Pair Corralation between Global E and Merit Medical
Given the investment horizon of 90 days Global E Online is expected to generate 2.67 times more return on investment than Merit Medical. However, Global E is 2.67 times more volatile than Merit Medical Systems. It trades about 0.47 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.21 per unit of risk. If you would invest 3,844 in Global E Online on September 1, 2024 and sell it today you would earn a total of 1,384 from holding Global E Online or generate 36.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global E Online vs. Merit Medical Systems
Performance |
| Timeline |
| Global E Online |
| Merit Medical Systems |
Global E and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global E and Merit Medical
The main advantage of trading using opposite Global E and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E 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.The idea behind Global E Online and Merit Medical Systems 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.| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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