Correlation Between Merit Medical and AIR PRODCHEMICALS
Can any of the company-specific risk be diversified away by investing in both Merit Medical and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS, you can compare the effects of market volatilities on Merit Medical and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and AIR PRODCHEMICALS.
Diversification Opportunities for Merit Medical and AIR PRODCHEMICALS
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merit and AIR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of Merit Medical i.e., Merit Medical and AIR PRODCHEMICALS go up and down completely randomly.
Pair Corralation between Merit Medical and AIR PRODCHEMICALS
Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 1.04 times more return on investment than AIR PRODCHEMICALS. However, Merit Medical is 1.04 times more volatile than AIR PRODCHEMICALS. It trades about 0.04 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.01 per unit of risk. If you would invest 6,750 in Merit Medical Systems on September 28, 2024 and sell it today you would earn a total of 2,550 from holding Merit Medical Systems or generate 37.78% 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. AIR PRODCHEMICALS
Performance |
| Timeline |
| Merit Medical Systems |
| AIR PRODCHEMICALS |
Merit Medical and AIR PRODCHEMICALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and AIR PRODCHEMICALS
The main advantage of trading using opposite Merit Medical and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, AIR PRODCHEMICALS 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 AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.| Merit Medical vs. CVW CLEANTECH INC | Merit Medical vs. PARKEN Sport Entertainment | Merit Medical vs. Scientific Games | Merit Medical vs. ADRIATIC METALS LS 013355 |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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