Correlation Between Merit Medical and Western Sierra
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Western Sierra 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 Western Sierra 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 Western Sierra Mining, you can compare the effects of market volatilities on Merit Medical and Western Sierra 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 Western Sierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Western Sierra.
Diversification Opportunities for Merit Medical and Western Sierra
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merit and Western is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining 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 Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Merit Medical i.e., Merit Medical and Western Sierra go up and down completely randomly.
Pair Corralation between Merit Medical and Western Sierra
Given the investment horizon of 90 days Merit Medical Systems is expected to generate 2.68 times more return on investment than Western Sierra. However, Merit Medical is 2.68 times more volatile than Western Sierra Mining. It trades about 0.2 of its potential returns per unit of risk. Western Sierra Mining is currently generating about 0.0 per unit of risk. If you would invest 9,880 in Merit Medical Systems on September 2, 2024 and sell it today you would earn a total of 510.00 from holding Merit Medical Systems or generate 5.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Merit Medical Systems vs. Western Sierra Mining
Performance |
| Timeline |
| Merit Medical Systems |
| Western Sierra Mining |
Merit Medical and Western Sierra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merit Medical and Western Sierra
The main advantage of trading using opposite Merit Medical and Western Sierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Western Sierra 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 Western Sierra will offset losses from the drop in Western Sierra's long position.| Merit Medical vs. Profound Medical Corp | Merit Medical vs. Si Bone | Merit Medical vs. Nevro Corp | Merit Medical vs. Orthopediatrics Corp |
| Western Sierra vs. Holloman Energy Corp | Western Sierra vs. cbdMD Inc | Western Sierra vs. Evolus Inc | Western Sierra vs. CV Sciences |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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