Correlation Between Merit Medical and Centessa Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Centessa Pharmaceuticals 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 Centessa Pharmaceuticals 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 Centessa Pharmaceuticals PLC, you can compare the effects of market volatilities on Merit Medical and Centessa Pharmaceuticals 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 Centessa Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Centessa Pharmaceuticals.
Diversification Opportunities for Merit Medical and Centessa Pharmaceuticals
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merit and Centessa is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals 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 Centessa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centessa Pharmaceuticals has no effect on the direction of Merit Medical i.e., Merit Medical and Centessa Pharmaceuticals go up and down completely randomly.
Pair Corralation between Merit Medical and Centessa Pharmaceuticals
Given the investment horizon of 90 days Merit Medical is expected to generate 3.02 times less return on investment than Centessa Pharmaceuticals. But when comparing it to its historical volatility, Merit Medical Systems is 2.82 times less risky than Centessa Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. Centessa Pharmaceuticals PLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 600.00 in Centessa Pharmaceuticals PLC on August 24, 2024 and sell it today you would earn a total of 1,116 from holding Centessa Pharmaceuticals PLC or generate 186.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Centessa Pharmaceuticals PLC
Performance |
| Timeline |
| Merit Medical Systems |
| Centessa Pharmaceuticals |
Merit Medical and Centessa Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Centessa Pharmaceuticals
The main advantage of trading using opposite Merit Medical and Centessa Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Centessa Pharmaceuticals 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 Centessa Pharmaceuticals will offset losses from the drop in Centessa Pharmaceuticals' long position.| Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies, | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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