Correlation Between Merit Medical and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Merit Medical and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Dow Jones.
Diversification Opportunities for Merit Medical and Dow Jones
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Merit and Dow is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Merit Medical i.e., Merit Medical and Dow Jones go up and down completely randomly.
Pair Corralation between Merit Medical and Dow Jones
Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 2.01 times more return on investment than Dow Jones. However, Merit Medical is 2.01 times more volatile than Dow Jones Industrial. It trades about 0.41 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.41 per unit of risk. If you would invest 9,250 in Merit Medical Systems on November 2, 2024 and sell it today you would earn a total of 1,250 from holding Merit Medical Systems or generate 13.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Merit Medical Systems vs. Dow Jones Industrial
Performance |
| Timeline |
Merit Medical and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Merit Medical Systems
Pair trading matchups for Merit Medical
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Merit Medical and Dow Jones
The main advantage of trading using opposite Merit Medical and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 |
| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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