Correlation Between Altria and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Altria and Merit Medical 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 Altria and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and Merit Medical Systems, you can compare the effects of market volatilities on Altria and Merit Medical 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 Altria with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and Merit Medical.
Diversification Opportunities for Altria and Merit Medical
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Altria and Merit is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Merit Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merit Medical Systems and Altria 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 Altria Group are associated (or correlated) with Merit Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merit Medical Systems has no effect on the direction of Altria i.e., Altria and Merit Medical go up and down completely randomly.
Pair Corralation between Altria and Merit Medical
Allowing for the 90-day total investment horizon Altria Group is expected to generate 0.63 times more return on investment than Merit Medical. However, Altria Group is 1.59 times less risky than Merit Medical. It trades about 0.37 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.23 per unit of risk. If you would invest 5,388 in Altria Group on September 4, 2024 and sell it today you would earn a total of 330.00 from holding Altria Group or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Altria Group vs. Merit Medical Systems
Performance |
| Timeline |
| Altria Group |
| Merit Medical Systems |
Altria and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altria and Merit Medical
The main advantage of trading using opposite Altria and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria position performs unexpectedly, Merit Medical 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 Merit Medical will offset losses from the drop in Merit Medical's long position.| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria vs. Philip Morris International |
| Merit Medical vs. Baxter International | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ResMed Inc | Merit Medical vs. The Cooper Companies, |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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