Correlation Between Merit Medical and MI Homes
Can any of the company-specific risk be diversified away by investing in both Merit Medical and MI Homes 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 MI Homes 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 MI Homes, you can compare the effects of market volatilities on Merit Medical and MI Homes 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 MI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and MI Homes.
Diversification Opportunities for Merit Medical and MI Homes
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merit and MHO is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes 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 MI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Homes has no effect on the direction of Merit Medical i.e., Merit Medical and MI Homes go up and down completely randomly.
Pair Corralation between Merit Medical and MI Homes
Given the investment horizon of 90 days Merit Medical is expected to generate 1.7 times less return on investment than MI Homes. But when comparing it to its historical volatility, Merit Medical Systems is 1.95 times less risky than MI Homes. It trades about 0.21 of its potential returns per unit of risk. MI Homes is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 15,159 in MI Homes on September 1, 2024 and sell it today you would earn a total of 1,344 from holding MI Homes or generate 8.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. MI Homes
Performance |
| Timeline |
| Merit Medical Systems |
| MI Homes |
Merit Medical and MI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and MI Homes
The main advantage of trading using opposite Merit Medical and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, MI Homes 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 MI Homes will offset losses from the drop in MI Homes' long position.| Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies, | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
| MI Homes vs. TRI Pointe Homes | MI Homes vs. Beazer Homes USA | MI Homes vs. Century Communities | MI Homes vs. Meritage |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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