Correlation Between Merit Medical and MGIC Investment
Can any of the company-specific risk be diversified away by investing in both Merit Medical and MGIC Investment 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 MGIC Investment 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 MGIC Investment Corp, you can compare the effects of market volatilities on Merit Medical and MGIC Investment 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 MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and MGIC Investment.
Diversification Opportunities for Merit Medical and MGIC Investment
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merit and MGIC is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and MGIC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC Investment 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 MGIC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC Investment Corp has no effect on the direction of Merit Medical i.e., Merit Medical and MGIC Investment go up and down completely randomly.
Pair Corralation between Merit Medical and MGIC Investment
Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.82 times more return on investment than MGIC Investment. However, Merit Medical Systems is 1.22 times less risky than MGIC Investment. It trades about 0.15 of its potential returns per unit of risk. MGIC Investment Corp is currently generating about 0.12 per unit of risk. If you would invest 8,333 in Merit Medical Systems on September 3, 2024 and sell it today you would earn a total of 2,057 from holding Merit Medical Systems or generate 24.68% 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. MGIC Investment Corp
Performance |
| Timeline |
| Merit Medical Systems |
| MGIC Investment Corp |
Merit Medical and MGIC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and MGIC Investment
The main advantage of trading using opposite Merit Medical and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, MGIC Investment 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 MGIC Investment will offset losses from the drop in MGIC Investment's long position.The idea behind Merit Medical Systems and MGIC Investment Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| MGIC Investment vs. MBIA Inc | MGIC Investment vs. NMI Holdings | MGIC Investment vs. Essent Group | MGIC Investment vs. Assured Guaranty |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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