Correlation Between NYSE Composite and Merit Medical
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Merit Medical Systems, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Merit Medical.
Diversification Opportunities for NYSE Composite and Merit Medical
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Merit is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Merit Medical go up and down completely randomly.
Pair Corralation between NYSE Composite and Merit Medical
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.48 times more return on investment than Merit Medical. However, NYSE Composite is 2.08 times less risky than Merit Medical. It trades about -0.35 of its potential returns per unit of risk. Merit Medical Systems is currently generating about -0.26 per unit of risk. If you would invest 2,016,821 in NYSE Composite on December 13, 2024 and sell it today you would lose (129,268) from holding NYSE Composite or give up 6.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Merit Medical Systems
Performance |
| Timeline |
NYSE Composite and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Merit Medical Systems
Pair trading matchups for Merit Medical
Pair Trading with NYSE Composite and Merit Medical
The main advantage of trading using opposite NYSE Composite and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. ServiceNow | ||
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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