Correlation Between Merit Medical and Aspen Insurance
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Aspen Insurance 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 Aspen Insurance 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 Aspen Insurance Holdings, you can compare the effects of market volatilities on Merit Medical and Aspen Insurance 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 Aspen Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Aspen Insurance.
Diversification Opportunities for Merit Medical and Aspen Insurance
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Merit and Aspen is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Aspen Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Insurance Holdings 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 Aspen Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Insurance Holdings has no effect on the direction of Merit Medical i.e., Merit Medical and Aspen Insurance go up and down completely randomly.
Pair Corralation between Merit Medical and Aspen Insurance
Given the investment horizon of 90 days Merit Medical Systems is expected to generate 1.09 times more return on investment than Aspen Insurance. However, Merit Medical is 1.09 times more volatile than Aspen Insurance Holdings. It trades about 0.15 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about 0.07 per unit of risk. If you would invest 8,333 in Merit Medical Systems on September 3, 2024 and sell it today you would earn a total of 2,057 from holding Merit Medical Systems or generate 24.68% 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. Aspen Insurance Holdings
Performance |
| Timeline |
| Merit Medical Systems |
| Aspen Insurance Holdings |
Merit Medical and Aspen Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Aspen Insurance
The main advantage of trading using opposite Merit Medical and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Aspen Insurance 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 Aspen Insurance will offset losses from the drop in Aspen Insurance's long position.The idea behind Merit Medical Systems and Aspen Insurance Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Aspen Insurance vs. Aspen Insurance Holdings | Aspen Insurance vs. Selective Insurance Group | Aspen Insurance vs. The Allstate | Aspen Insurance vs. AmTrust Financial Services |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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