Correlation Between Merit Medical and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Selective Insurance 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 Selective Insurance 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 Selective Insurance Group, you can compare the effects of market volatilities on Merit Medical and Selective Insurance 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Selective Insurance.
Diversification Opportunities for Merit Medical and Selective Insurance
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merit and Selective is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Merit Medical i.e., Merit Medical and Selective Insurance go up and down completely randomly.
Pair Corralation between Merit Medical and Selective Insurance
Given the investment horizon of 90 days Merit Medical Systems is expected to generate 1.09 times more return on investment than Selective Insurance. However, Merit Medical is 1.09 times more volatile than Selective Insurance Group. It trades about -0.26 of its potential returns per unit of risk. Selective Insurance Group is currently generating about -0.33 per unit of risk. If you would invest 10,276 in Merit Medical Systems on October 14, 2024 and sell it today you would lose (660.00) from holding Merit Medical Systems or give up 6.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Selective Insurance Group
Performance |
| Timeline |
| Merit Medical Systems |
| Selective Insurance |
Merit Medical and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Selective Insurance
The main advantage of trading using opposite Merit Medical and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.| Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies, | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
| Selective Insurance vs. Kemper | Selective Insurance vs. Donegal Group B | Selective Insurance vs. Argo Group International | Selective Insurance vs. Global Indemnity PLC |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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