Correlation Between Merit Medical and Federal National
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Federal National 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 Federal National 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 Federal National Mortgage, you can compare the effects of market volatilities on Merit Medical and Federal National 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 Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Federal National.
Diversification Opportunities for Merit Medical and Federal National
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merit and Federal is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage 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 Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of Merit Medical i.e., Merit Medical and Federal National go up and down completely randomly.
Pair Corralation between Merit Medical and Federal National
Given the investment horizon of 90 days Merit Medical is expected to generate 8.02 times less return on investment than Federal National. But when comparing it to its historical volatility, Merit Medical Systems is 3.71 times less risky than Federal National. It trades about 0.05 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 49.00 in Federal National Mortgage on October 12, 2024 and sell it today you would earn a total of 449.00 from holding Federal National Mortgage or generate 916.33% 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. Federal National Mortgage
Performance |
| Timeline |
| Merit Medical Systems |
| Federal National Mortgage |
Merit Medical and Federal National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Federal National
The main advantage of trading using opposite Merit Medical and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Federal National 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 Federal National will offset losses from the drop in Federal National'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 |
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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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