Correlation Between Merit Medical and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum, you can compare the effects of market volatilities on Merit Medical and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Kaiser Aluminum.
Diversification Opportunities for Merit Medical and Kaiser Aluminum
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merit and Kaiser is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Merit Medical i.e., Merit Medical and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Merit Medical and Kaiser Aluminum
Given the investment horizon of 90 days Merit Medical is expected to generate 1.05 times less return on investment than Kaiser Aluminum. But when comparing it to its historical volatility, Merit Medical Systems is 1.82 times less risky than Kaiser Aluminum. It trades about 0.32 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 7,607 in Kaiser Aluminum on August 28, 2024 and sell it today you would earn a total of 771.00 from holding Kaiser Aluminum or generate 10.14% 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. Kaiser Aluminum
Performance |
| Timeline |
| Merit Medical Systems |
| Kaiser Aluminum |
Merit Medical and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Kaiser Aluminum
The main advantage of trading using opposite Merit Medical and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| Merit Medical vs. Heartbeam | Merit Medical vs. EUDA Health Holdings | Merit Medical vs. Nutex Health | Merit Medical vs. Healthcare Triangle |
| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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