Correlation Between Merit Medical and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Lifeway Foods 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 Lifeway Foods 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 Lifeway Foods, you can compare the effects of market volatilities on Merit Medical and Lifeway Foods 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 Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Lifeway Foods.
Diversification Opportunities for Merit Medical and Lifeway Foods
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merit and Lifeway is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods 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 Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Merit Medical i.e., Merit Medical and Lifeway Foods go up and down completely randomly.
Pair Corralation between Merit Medical and Lifeway Foods
Assuming the 90 days trading horizon Merit Medical Systems is expected to under-perform the Lifeway Foods. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 1.47 times less risky than Lifeway Foods. The stock trades about -0.25 of its potential returns per unit of risk. The Lifeway Foods is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 2,320 in Lifeway Foods on September 24, 2024 and sell it today you would lose (120.00) from holding Lifeway Foods or give up 5.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merit Medical Systems vs. Lifeway Foods
Performance |
| Timeline |
| Merit Medical Systems |
| Lifeway Foods |
Merit Medical and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Lifeway Foods
The main advantage of trading using opposite Merit Medical and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Lifeway Foods 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 Lifeway Foods will offset losses from the drop in Lifeway Foods' long position.| Merit Medical vs. HOCHSCHILD MINING | Merit Medical vs. Western Copper and | Merit Medical vs. GameStop Corp | Merit Medical vs. FUTURE GAMING GRP |
| Lifeway Foods vs. Mowi ASA | Lifeway Foods vs. LEROY SEAFOOD GRUNSPADR | Lifeway Foods vs. Lery Seafood Group | Lifeway Foods vs. Nisshin Seifun Group |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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