Correlation Between Merit Medical and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Auto Trader 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 Merit Medical and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merit Medical Systems and Auto Trader Group, you can compare the effects of market volatilities on Merit Medical and Auto Trader 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 Merit Medical with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Auto Trader.
Diversification Opportunities for Merit Medical and Auto Trader
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merit and Auto is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and Merit Medical 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 Merit Medical Systems are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Merit Medical i.e., Merit Medical and Auto Trader go up and down completely randomly.
Pair Corralation between Merit Medical and Auto Trader
Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 1.07 times more return on investment than Auto Trader. However, Merit Medical is 1.07 times more volatile than Auto Trader Group. It trades about 0.09 of its potential returns per unit of risk. Auto Trader Group is currently generating about 0.08 per unit of risk. If you would invest 6,450 in Merit Medical Systems on September 4, 2024 and sell it today you would earn a total of 3,450 from holding Merit Medical Systems or generate 53.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Auto Trader Group
Performance |
| Timeline |
| Merit Medical Systems |
| Auto Trader Group |
Merit Medical and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Auto Trader
The main advantage of trading using opposite Merit Medical and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc |
| Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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