Correlation Between Merit Medical and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Merit Medical and IPG Photonics 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 IPG Photonics 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 IPG Photonics, you can compare the effects of market volatilities on Merit Medical and IPG Photonics 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 IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and IPG Photonics.
Diversification Opportunities for Merit Medical and IPG Photonics
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Merit and IPG is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics 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 IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Merit Medical i.e., Merit Medical and IPG Photonics go up and down completely randomly.
Pair Corralation between Merit Medical and IPG Photonics
Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.53 times more return on investment than IPG Photonics. However, Merit Medical Systems is 1.89 times less risky than IPG Photonics. It trades about 0.21 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.07 per unit of risk. If you would invest 9,866 in Merit Medical Systems on September 1, 2024 and sell it today you would earn a total of 524.00 from holding Merit Medical Systems or generate 5.31% 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. IPG Photonics
Performance |
| Timeline |
| Merit Medical Systems |
| IPG Photonics |
Merit Medical and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and IPG Photonics
The main advantage of trading using opposite Merit Medical and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, IPG Photonics 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 IPG Photonics will offset losses from the drop in IPG Photonics' long position.| Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies, | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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