Correlation Between Merit Medical and Home Depot
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Home Depot 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 Home Depot 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 The Home Depot, you can compare the effects of market volatilities on Merit Medical and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Home Depot.
Diversification Opportunities for Merit Medical and Home Depot
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merit and Home is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Merit Medical i.e., Merit Medical and Home Depot go up and down completely randomly.
Pair Corralation between Merit Medical and Home Depot
Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 1.29 times more return on investment than Home Depot. However, Merit Medical is 1.29 times more volatile than The Home Depot. It trades about 0.37 of its potential returns per unit of risk. The Home Depot is currently generating about 0.27 per unit of risk. If you would invest 9,150 in Merit Medical Systems on November 9, 2024 and sell it today you would earn a total of 1,150 from holding Merit Medical Systems or generate 12.57% 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. The Home Depot
Performance |
| Timeline |
| Merit Medical Systems |
| Home Depot |
Merit Medical and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Home Depot
The main advantage of trading using opposite Merit Medical and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Merit Medical vs. CNVISION MEDIA | Merit Medical vs. Fuji Media Holdings | Merit Medical vs. CN MODERN DAIRY | Merit Medical vs. INDOFOOD AGRI RES |
| Home Depot vs. Penn National Gaming | Home Depot vs. GAMESTOP | Home Depot vs. Media and Games | Home Depot vs. MOVIE GAMES SA |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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