Correlation Between Merit Medical and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Fevertree Drinks 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 Fevertree Drinks 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 Fevertree Drinks PLC, you can compare the effects of market volatilities on Merit Medical and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Fevertree Drinks.
Diversification Opportunities for Merit Medical and Fevertree Drinks
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merit and Fevertree is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Fevertree Drinks PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks PLC has no effect on the direction of Merit Medical i.e., Merit Medical and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Merit Medical and Fevertree Drinks
Assuming the 90 days trading horizon Merit Medical Systems is expected to under-perform the Fevertree Drinks. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 3.63 times less risky than Fevertree Drinks. The stock trades about -0.14 of its potential returns per unit of risk. The Fevertree Drinks PLC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 760.00 in Fevertree Drinks PLC on November 28, 2024 and sell it today you would earn a total of 105.00 from holding Fevertree Drinks PLC or generate 13.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Fevertree Drinks PLC
Performance |
| Timeline |
| Merit Medical Systems |
| Fevertree Drinks PLC |
Merit Medical and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Fevertree Drinks
The main advantage of trading using opposite Merit Medical and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.| Merit Medical vs. Micron Technology | Merit Medical vs. Samsung Electronics Co | Merit Medical vs. X FAB Silicon Foundries | Merit Medical vs. KIMBALL ELECTRONICS |
| Fevertree Drinks vs. CREDIT AGRICOLE | Fevertree Drinks vs. GEAR4MUSIC LS 10 | Fevertree Drinks vs. Virtu Financial | Fevertree Drinks vs. Cembra Money Bank |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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