Correlation Between Merit Medical and Digi International
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Digi International 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 Digi International 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 Digi International, you can compare the effects of market volatilities on Merit Medical and Digi International 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 Digi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Digi International.
Diversification Opportunities for Merit Medical and Digi International
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merit and Digi is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International 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 Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of Merit Medical i.e., Merit Medical and Digi International go up and down completely randomly.
Pair Corralation between Merit Medical and Digi International
Given the investment horizon of 90 days Merit Medical is expected to generate 2.73 times less return on investment than Digi International. But when comparing it to its historical volatility, Merit Medical Systems is 2.22 times less risky than Digi International. It trades about 0.2 of its potential returns per unit of risk. Digi International is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,905 in Digi International on September 2, 2024 and sell it today you would earn a total of 417.00 from holding Digi International or generate 14.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Digi International
Performance |
| Timeline |
| Merit Medical Systems |
| Digi International |
Merit Medical and Digi International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Digi International
The main advantage of trading using opposite Merit Medical and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Digi International 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 Digi International will offset losses from the drop in Digi International's long position.| Merit Medical vs. Profound Medical Corp | Merit Medical vs. Si Bone | Merit Medical vs. Nevro Corp | Merit Medical vs. Orthopediatrics Corp |
| Digi International vs. Extreme Networks | Digi International vs. Ciena Corp | Digi International vs. Harmonic | Digi International vs. Comtech Telecommunications Corp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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