Correlation Between Merit Medical and TKO Group
Can any of the company-specific risk be diversified away by investing in both Merit Medical and TKO Group 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 TKO Group 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 TKO Group Holdings,, you can compare the effects of market volatilities on Merit Medical and TKO Group 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 TKO Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and TKO Group.
Diversification Opportunities for Merit Medical and TKO Group
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Merit and TKO is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and TKO Group Holdings, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TKO Group Holdings, 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 TKO Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TKO Group Holdings, has no effect on the direction of Merit Medical i.e., Merit Medical and TKO Group go up and down completely randomly.
Pair Corralation between Merit Medical and TKO Group
Given the investment horizon of 90 days Merit Medical is expected to generate 2.91 times less return on investment than TKO Group. But when comparing it to its historical volatility, Merit Medical Systems is 1.51 times less risky than TKO Group. It trades about 0.2 of its potential returns per unit of risk. TKO Group Holdings, is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 11,907 in TKO Group Holdings, on September 2, 2024 and sell it today you would earn a total of 1,889 from holding TKO Group Holdings, or generate 15.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. TKO Group Holdings,
Performance |
| Timeline |
| Merit Medical Systems |
| TKO Group Holdings, |
Merit Medical and TKO Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and TKO Group
The main advantage of trading using opposite Merit Medical and TKO Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, TKO Group 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 TKO Group will offset losses from the drop in TKO Group's long position.| Merit Medical vs. Profound Medical Corp | Merit Medical vs. Si Bone | Merit Medical vs. Nevro Corp | Merit Medical vs. Orthopediatrics Corp |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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