Correlation Between Merit Medical and Bausch Lomb
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Bausch Lomb 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 Bausch Lomb 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 Bausch Lomb Corp, you can compare the effects of market volatilities on Merit Medical and Bausch Lomb 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 Bausch Lomb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Bausch Lomb.
Diversification Opportunities for Merit Medical and Bausch Lomb
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Merit and Bausch is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Bausch Lomb Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Lomb Corp 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 Bausch Lomb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Lomb Corp has no effect on the direction of Merit Medical i.e., Merit Medical and Bausch Lomb go up and down completely randomly.
Pair Corralation between Merit Medical and Bausch Lomb
Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.86 times more return on investment than Bausch Lomb. However, Merit Medical Systems is 1.17 times less risky than Bausch Lomb. It trades about 0.28 of its potential returns per unit of risk. Bausch Lomb Corp is currently generating about -0.08 per unit of risk. If you would invest 9,531 in Merit Medical Systems on August 29, 2024 and sell it today you would earn a total of 869.00 from holding Merit Medical Systems or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Bausch Lomb Corp
Performance |
| Timeline |
| Merit Medical Systems |
| Bausch Lomb Corp |
Merit Medical and Bausch Lomb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Bausch Lomb
The main advantage of trading using opposite Merit Medical and Bausch Lomb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Bausch Lomb 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 Bausch Lomb will offset losses from the drop in Bausch Lomb's long position.The idea behind Merit Medical Systems and Bausch Lomb Corp 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.| Bausch Lomb vs. The Cooper Companies, | Bausch Lomb vs. ICU Medical | Bausch Lomb vs. Hologic | Bausch Lomb vs. Becton Dickinson and |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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