Correlation Between Merit Medical and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Sims Metal 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 Sims Metal 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 Sims Metal Management, you can compare the effects of market volatilities on Merit Medical and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Sims Metal.
Diversification Opportunities for Merit Medical and Sims Metal
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merit and Sims is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Merit Medical i.e., Merit Medical and Sims Metal go up and down completely randomly.
Pair Corralation between Merit Medical and Sims Metal
Assuming the 90 days trading horizon Merit Medical is expected to generate 3.5 times less return on investment than Sims Metal. But when comparing it to its historical volatility, Merit Medical Systems is 1.38 times less risky than Sims Metal. It trades about 0.04 of its potential returns per unit of risk. Sims Metal Management is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 631.00 in Sims Metal Management on December 10, 2024 and sell it today you would earn a total of 169.00 from holding Sims Metal Management or generate 26.78% 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. Sims Metal Management
Performance |
| Timeline |
| Merit Medical Systems |
| Sims Metal Management |
Merit Medical and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Sims Metal
The main advantage of trading using opposite Merit Medical and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| Merit Medical vs. STRAYER EDUCATION | Merit Medical vs. Grand Canyon Education | Merit Medical vs. Zijin Mining Group | Merit Medical vs. Stag Industrial |
| Sims Metal vs. Daido Steel Co | Sims Metal vs. Khiron Life Sciences | Sims Metal vs. GBS Software AG | Sims Metal vs. Beta Systems Software |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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