Correlation Between Merit Medical and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Gamma Communications 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 Gamma Communications 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 Gamma Communications plc, you can compare the effects of market volatilities on Merit Medical and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Gamma Communications.
Diversification Opportunities for Merit Medical and Gamma Communications
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merit and Gamma is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Gamma Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications plc 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications plc has no effect on the direction of Merit Medical i.e., Merit Medical and Gamma Communications go up and down completely randomly.
Pair Corralation between Merit Medical and Gamma Communications
Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 0.75 times more return on investment than Gamma Communications. However, Merit Medical Systems is 1.33 times less risky than Gamma Communications. It trades about 0.16 of its potential returns per unit of risk. Gamma Communications plc is currently generating about 0.08 per unit of risk. If you would invest 6,650 in Merit Medical Systems on September 3, 2024 and sell it today you would earn a total of 3,100 from holding Merit Medical Systems or generate 46.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Gamma Communications plc
Performance |
| Timeline |
| Merit Medical Systems |
| Gamma Communications plc |
Merit Medical and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Gamma Communications
The main advantage of trading using opposite Merit Medical and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc |
| Gamma Communications vs. Hemisphere Energy Corp | Gamma Communications vs. NetSol Technologies | Gamma Communications vs. LG Display Co | Gamma Communications vs. Citic Telecom International |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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