Correlation Between Merit Medical and Emerson Radio
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Emerson Radio 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 Emerson Radio 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 Emerson Radio, you can compare the effects of market volatilities on Merit Medical and Emerson Radio 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 Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Emerson Radio.
Diversification Opportunities for Merit Medical and Emerson Radio
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merit and Emerson is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio 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 Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of Merit Medical i.e., Merit Medical and Emerson Radio go up and down completely randomly.
Pair Corralation between Merit Medical and Emerson Radio
Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.48 times more return on investment than Emerson Radio. However, Merit Medical Systems is 2.09 times less risky than Emerson Radio. It trades about 0.28 of its potential returns per unit of risk. Emerson Radio is currently generating about -0.18 per unit of risk. If you would invest 9,531 in Merit Medical Systems on August 29, 2024 and sell it today you would earn a total of 869.00 from holding Merit Medical Systems or generate 9.12% 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. Emerson Radio
Performance |
| Timeline |
| Merit Medical Systems |
| Emerson Radio |
Merit Medical and Emerson Radio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Emerson Radio
The main advantage of trading using opposite Merit Medical and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Emerson Radio 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 Emerson Radio will offset losses from the drop in Emerson Radio's long position.| Merit Medical vs. Femasys | Merit Medical vs. Sharps Technology Warrant | Merit Medical vs. GlucoTrack | Merit Medical vs. Walt Disney |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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