Correlation Between Merit Medical and Freedom Holding
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Freedom Holding 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 Freedom Holding 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 Freedom Holding Corp, you can compare the effects of market volatilities on Merit Medical and Freedom Holding 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 Freedom Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Freedom Holding.
Diversification Opportunities for Merit Medical and Freedom Holding
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merit and Freedom is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding 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 Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of Merit Medical i.e., Merit Medical and Freedom Holding go up and down completely randomly.
Pair Corralation between Merit Medical and Freedom Holding
Given the investment horizon of 90 days Merit Medical is expected to generate 1.81 times less return on investment than Freedom Holding. But when comparing it to its historical volatility, Merit Medical Systems is 1.6 times less risky than Freedom Holding. It trades about 0.21 of its potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 10,840 in Freedom Holding Corp on September 1, 2024 and sell it today you would earn a total of 1,048 from holding Freedom Holding Corp or generate 9.67% 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. Freedom Holding Corp
Performance |
| Timeline |
| Merit Medical Systems |
| Freedom Holding Corp |
Merit Medical and Freedom Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Freedom Holding
The main advantage of trading using opposite Merit Medical and Freedom Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Freedom Holding 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 Freedom Holding will offset losses from the drop in Freedom Holding'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 |
| Freedom Holding vs. Nomura Holdings ADR | Freedom Holding vs. Scully Royalty | Freedom Holding vs. Oppenheimer Holdings | Freedom Holding vs. Houlihan Lokey |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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