Correlation Between Merit Medical and CarsalesCom
Can any of the company-specific risk be diversified away by investing in both Merit Medical and CarsalesCom 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 CarsalesCom 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 CarsalesCom, you can compare the effects of market volatilities on Merit Medical and CarsalesCom 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 CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and CarsalesCom.
Diversification Opportunities for Merit Medical and CarsalesCom
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Merit and CarsalesCom is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Merit Medical i.e., Merit Medical and CarsalesCom go up and down completely randomly.
Pair Corralation between Merit Medical and CarsalesCom
Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 1.06 times more return on investment than CarsalesCom. However, Merit Medical is 1.06 times more volatile than CarsalesCom. It trades about 0.1 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.08 per unit of risk. If you would invest 5,800 in Merit Medical Systems on September 21, 2024 and sell it today you would earn a total of 3,300 from holding Merit Medical Systems or generate 56.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. CarsalesCom
Performance |
| Timeline |
| Merit Medical Systems |
| CarsalesCom |
Merit Medical and CarsalesCom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and CarsalesCom
The main advantage of trading using opposite Merit Medical and CarsalesCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, CarsalesCom 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 CarsalesCom will offset losses from the drop in CarsalesCom's long position.| Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc | Merit Medical vs. Apple Inc |
| CarsalesCom vs. BRIT AMER TOBACCO | CarsalesCom vs. ANGLER GAMING PLC | CarsalesCom vs. OURGAME INTHOLDL 00005 | CarsalesCom vs. DETALION 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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