Correlation Between Merit Medical and United Parks
Can any of the company-specific risk be diversified away by investing in both Merit Medical and United Parks 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 United Parks 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 United Parks Resorts, you can compare the effects of market volatilities on Merit Medical and United Parks 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 United Parks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and United Parks.
Diversification Opportunities for Merit Medical and United Parks
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merit and United is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts 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 United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Merit Medical i.e., Merit Medical and United Parks go up and down completely randomly.
Pair Corralation between Merit Medical and United Parks
Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.56 times more return on investment than United Parks. However, Merit Medical Systems is 1.78 times less risky than United Parks. It trades about 0.16 of its potential returns per unit of risk. United Parks Resorts is currently generating about 0.06 per unit of risk. If you would invest 7,951 in Merit Medical Systems on September 3, 2024 and sell it today you would earn a total of 2,439 from holding Merit Medical Systems or generate 30.68% 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. United Parks Resorts
Performance |
| Timeline |
| Merit Medical Systems |
| United Parks Resorts |
Merit Medical and United Parks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and United Parks
The main advantage of trading using opposite Merit Medical and United Parks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, United Parks 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 United Parks will offset losses from the drop in United Parks' long position.The idea behind Merit Medical Systems and United Parks Resorts 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.| United Parks vs. Transportadora de Gas | United Parks vs. NiSource | United Parks vs. PGE Corp | United Parks vs. Integral Ad Science |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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