Correlation Between Merit Medical and TESCO PLC
Can any of the company-specific risk be diversified away by investing in both Merit Medical and TESCO PLC 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 TESCO PLC 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 TESCO PLC ADR1, you can compare the effects of market volatilities on Merit Medical and TESCO PLC 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 TESCO PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and TESCO PLC.
Diversification Opportunities for Merit Medical and TESCO PLC
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merit and TESCO is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and TESCO PLC ADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TESCO PLC ADR1 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 TESCO PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TESCO PLC ADR1 has no effect on the direction of Merit Medical i.e., Merit Medical and TESCO PLC go up and down completely randomly.
Pair Corralation between Merit Medical and TESCO PLC
Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 1.02 times more return on investment than TESCO PLC. However, Merit Medical is 1.02 times more volatile than TESCO PLC ADR1. It trades about 0.1 of its potential returns per unit of risk. TESCO PLC ADR1 is currently generating about 0.08 per unit of risk. If you would invest 5,950 in Merit Medical Systems on August 29, 2024 and sell it today you would earn a total of 3,800 from holding Merit Medical Systems or generate 63.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. TESCO PLC ADR1
Performance |
| Timeline |
| Merit Medical Systems |
| TESCO PLC ADR1 |
Merit Medical and TESCO PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and TESCO PLC
The main advantage of trading using opposite Merit Medical and TESCO PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, TESCO PLC 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 TESCO PLC will offset losses from the drop in TESCO PLC's long position.| Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc |
| TESCO PLC vs. DIVERSIFIED ROYALTY | TESCO PLC vs. REGAL ASIAN INVESTMENTS | TESCO PLC vs. Merit Medical Systems | TESCO PLC vs. Diamyd Medical AB |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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