Correlation Between Merit Medical and Nintendo
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Nintendo 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 Nintendo 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 Nintendo Co, you can compare the effects of market volatilities on Merit Medical and Nintendo 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 Nintendo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Nintendo.
Diversification Opportunities for Merit Medical and Nintendo
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Merit and Nintendo is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Nintendo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nintendo 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 Nintendo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nintendo has no effect on the direction of Merit Medical i.e., Merit Medical and Nintendo go up and down completely randomly.
Pair Corralation between Merit Medical and Nintendo
Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 0.97 times more return on investment than Nintendo. However, Merit Medical Systems is 1.03 times less risky than Nintendo. It trades about 0.06 of its potential returns per unit of risk. Nintendo Co is currently generating about 0.05 per unit of risk. If you would invest 6,600 in Merit Medical Systems on October 25, 2024 and sell it today you would earn a total of 3,350 from holding Merit Medical Systems or generate 50.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Nintendo Co
Performance |
| Timeline |
| Merit Medical Systems |
| Nintendo |
Merit Medical and Nintendo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Nintendo
The main advantage of trading using opposite Merit Medical and Nintendo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Nintendo 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 Nintendo will offset losses from the drop in Nintendo's long position.| Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc |
| Nintendo vs. Telecom Argentina SA | Nintendo vs. Methode Electronics | Nintendo vs. Chengdu PUTIAN Telecommunications | Nintendo vs. STORE ELECTRONIC |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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