Correlation Between Merit Medical and CECO Environmental
Can any of the company-specific risk be diversified away by investing in both Merit Medical and CECO Environmental 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 CECO Environmental 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 CECO Environmental Corp, you can compare the effects of market volatilities on Merit Medical and CECO Environmental 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 CECO Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and CECO Environmental.
Diversification Opportunities for Merit Medical and CECO Environmental
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Merit and CECO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental 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 CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of Merit Medical i.e., Merit Medical and CECO Environmental go up and down completely randomly.
Pair Corralation between Merit Medical and CECO Environmental
Given the investment horizon of 90 days Merit Medical is expected to generate 5.8 times less return on investment than CECO Environmental. But when comparing it to its historical volatility, Merit Medical Systems is 2.55 times less risky than CECO Environmental. It trades about 0.21 of its potential returns per unit of risk. CECO Environmental Corp is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 2,380 in CECO Environmental Corp on September 1, 2024 and sell it today you would earn a total of 825.00 from holding CECO Environmental Corp or generate 34.66% 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. CECO Environmental Corp
Performance |
| Timeline |
| Merit Medical Systems |
| CECO Environmental Corp |
Merit Medical and CECO Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and CECO Environmental
The main advantage of trading using opposite Merit Medical and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, CECO Environmental 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 CECO Environmental will offset losses from the drop in CECO Environmental's long position.| Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies, | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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