Correlation Between Merit Medical and Tandem Diabetes
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Tandem Diabetes 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 Tandem Diabetes 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 Tandem Diabetes Care, you can compare the effects of market volatilities on Merit Medical and Tandem Diabetes 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 Tandem Diabetes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Tandem Diabetes.
Diversification Opportunities for Merit Medical and Tandem Diabetes
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Merit and Tandem is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Tandem Diabetes Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandem Diabetes Care 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 Tandem Diabetes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandem Diabetes Care has no effect on the direction of Merit Medical i.e., Merit Medical and Tandem Diabetes go up and down completely randomly.
Pair Corralation between Merit Medical and Tandem Diabetes
Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.32 times more return on investment than Tandem Diabetes. However, Merit Medical Systems is 3.08 times less risky than Tandem Diabetes. It trades about 0.16 of its potential returns per unit of risk. Tandem Diabetes Care is currently generating about -0.09 per unit of risk. If you would invest 8,218 in Merit Medical Systems on August 31, 2024 and sell it today you would earn a total of 2,172 from holding Merit Medical Systems or generate 26.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Tandem Diabetes Care
Performance |
| Timeline |
| Merit Medical Systems |
| Tandem Diabetes Care |
Merit Medical and Tandem Diabetes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Tandem Diabetes
The main advantage of trading using opposite Merit Medical and Tandem Diabetes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Tandem Diabetes 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 Tandem Diabetes will offset losses from the drop in Tandem Diabetes' long position.| Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies, | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
| Tandem Diabetes vs. DexCom Inc | Tandem Diabetes vs. Inspire Medical Systems | Tandem Diabetes vs. Penumbra | Tandem Diabetes vs. Insulet |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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