Correlation Between Merit Medical and Allegheny Technologies
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Allegheny Technologies 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 Allegheny Technologies 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 Allegheny Technologies Incorporated, you can compare the effects of market volatilities on Merit Medical and Allegheny Technologies 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 Allegheny Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Allegheny Technologies.
Diversification Opportunities for Merit Medical and Allegheny Technologies
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merit and Allegheny is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies 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 Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Merit Medical i.e., Merit Medical and Allegheny Technologies go up and down completely randomly.
Pair Corralation between Merit Medical and Allegheny Technologies
Assuming the 90 days trading horizon Merit Medical is expected to generate 1.65 times less return on investment than Allegheny Technologies. But when comparing it to its historical volatility, Merit Medical Systems is 1.35 times less risky than Allegheny Technologies. It trades about 0.05 of its potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,020 in Allegheny Technologies Incorporated on September 30, 2024 and sell it today you would earn a total of 2,296 from holding Allegheny Technologies Incorporated or generate 76.03% 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. Allegheny Technologies Incorpo
Performance |
| Timeline |
| Merit Medical Systems |
| Allegheny Technologies |
Merit Medical and Allegheny Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Allegheny Technologies
The main advantage of trading using opposite Merit Medical and Allegheny Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Allegheny Technologies 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 Allegheny Technologies will offset losses from the drop in Allegheny Technologies' long position.| Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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