Correlation Between Merit Medical and Waters
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Waters 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 Waters 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 Waters, you can compare the effects of market volatilities on Merit Medical and Waters 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 Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Waters.
Diversification Opportunities for Merit Medical and Waters
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Merit and Waters is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters 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 Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Merit Medical i.e., Merit Medical and Waters go up and down completely randomly.
Pair Corralation between Merit Medical and Waters
Given the investment horizon of 90 days Merit Medical is expected to generate 1.59 times less return on investment than Waters. But when comparing it to its historical volatility, Merit Medical Systems is 3.24 times less risky than Waters. It trades about 0.31 of its potential returns per unit of risk. Waters is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 32,730 in Waters on August 25, 2024 and sell it today you would earn a total of 4,617 from holding Waters or generate 14.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merit Medical Systems vs. Waters
Performance |
| Timeline |
| Merit Medical Systems |
| Waters |
Merit Medical and Waters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Waters
The main advantage of trading using opposite Merit Medical and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Waters 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 Waters will offset losses from the drop in Waters' long position.| Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies, | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
| Waters vs. IDEXX Laboratories | Waters vs. IQVIA Holdings | Waters vs. Charles River Laboratories | Waters vs. Revvity |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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