Correlation Between Merit Medical and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Summit Materials 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 Summit Materials 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 Summit Materials, you can compare the effects of market volatilities on Merit Medical and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Summit Materials.
Diversification Opportunities for Merit Medical and Summit Materials
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merit and Summit is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Merit Medical i.e., Merit Medical and Summit Materials go up and down completely randomly.
Pair Corralation between Merit Medical and Summit Materials
Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 2.03 times more return on investment than Summit Materials. However, Merit Medical is 2.03 times more volatile than Summit Materials. It trades about 0.33 of its potential returns per unit of risk. Summit Materials is currently generating about 0.08 per unit of risk. If you would invest 9,250 in Merit Medical Systems on November 3, 2024 and sell it today you would earn a total of 1,050 from holding Merit Medical Systems or generate 11.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Summit Materials
Performance |
| Timeline |
| Merit Medical Systems |
| Summit Materials |
Merit Medical and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Summit Materials
The main advantage of trading using opposite Merit Medical and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Merit Medical vs. Bio Techne Corp | Merit Medical vs. STORE ELECTRONIC | Merit Medical vs. Firan Technology Group | Merit Medical vs. Easy Software AG |
| Summit Materials vs. SIVERS SEMICONDUCTORS AB | Summit Materials vs. NorAm Drilling AS | Summit Materials vs. Volkswagen AG | Summit Materials vs. Darden Restaurants |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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