Correlation Between Merit Medical and STATE

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Merit Medical and STATE 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 STATE 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 STATE STREET P, you can compare the effects of market volatilities on Merit Medical and STATE 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 STATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and STATE.

Diversification Opportunities for Merit Medical and STATE

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Merit and STATE is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and STATE STREET P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STATE STREET P 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 STATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STATE STREET P has no effect on the direction of Merit Medical i.e., Merit Medical and STATE go up and down completely randomly.

Pair Corralation between Merit Medical and STATE

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 2.49 times more return on investment than STATE. However, Merit Medical is 2.49 times more volatile than STATE STREET P. It trades about 0.05 of its potential returns per unit of risk. STATE STREET P is currently generating about 0.01 per unit of risk. If you would invest  8,291  in Merit Medical Systems on September 9, 2024 and sell it today you would earn a total of  2,149  from holding Merit Medical Systems or generate 25.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.92%
ValuesDaily Returns

Merit Medical Systems  vs.  STATE STREET P

 Performance 
       Timeline  
Merit Medical Systems 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 7 (%) 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.
STATE STREET P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days STATE STREET P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, STATE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Merit Medical and STATE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merit Medical and STATE

The main advantage of trading using opposite Merit Medical and STATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, STATE 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 STATE will offset losses from the drop in STATE's long position.
The idea behind Merit Medical Systems and STATE STREET P 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

Other Complementary Tools

Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas