Correlation Between Merit Medical and Raphael Pharmaceutical

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Can any of the company-specific risk be diversified away by investing in both Merit Medical and Raphael Pharmaceutical 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 Raphael Pharmaceutical 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 Raphael Pharmaceutical, you can compare the effects of market volatilities on Merit Medical and Raphael Pharmaceutical 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 Raphael Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Raphael Pharmaceutical.

Diversification Opportunities for Merit Medical and Raphael Pharmaceutical

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Merit and Raphael is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Raphael Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raphael Pharmaceutical 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 Raphael Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raphael Pharmaceutical has no effect on the direction of Merit Medical i.e., Merit Medical and Raphael Pharmaceutical go up and down completely randomly.

Pair Corralation between Merit Medical and Raphael Pharmaceutical

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.17 times more return on investment than Raphael Pharmaceutical. However, Merit Medical Systems is 5.81 times less risky than Raphael Pharmaceutical. It trades about 0.05 of its potential returns per unit of risk. Raphael Pharmaceutical is currently generating about 0.01 per unit of risk. If you would invest  8,196  in Merit Medical Systems on September 12, 2024 and sell it today you would earn a total of  2,183  from holding Merit Medical Systems or generate 26.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Merit Medical Systems  vs.  Raphael Pharmaceutical

 Performance 
       Timeline  
Merit Medical Systems 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Merit Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Raphael Pharmaceutical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Raphael Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Merit Medical and Raphael Pharmaceutical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merit Medical and Raphael Pharmaceutical

The main advantage of trading using opposite Merit Medical and Raphael Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Raphael Pharmaceutical 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 Raphael Pharmaceutical will offset losses from the drop in Raphael Pharmaceutical's long position.
The idea behind Merit Medical Systems and Raphael Pharmaceutical 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.
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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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