Correlation Between Performance Food and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Performance Food 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 Performance Food and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Performance Food Group and Merit Medical Systems, you can compare the effects of market volatilities on Performance Food 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 Performance Food with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Merit Medical.
Diversification Opportunities for Performance Food and Merit Medical
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Performance and Merit is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food 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 Performance Food 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 Performance Food 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 Performance Food i.e., Performance Food and Merit Medical go up and down completely randomly.
Pair Corralation between Performance Food and Merit Medical
Assuming the 90 days trading horizon Performance Food Group is expected to generate 0.85 times more return on investment than Merit Medical. However, Performance Food Group is 1.18 times less risky than Merit Medical. It trades about -0.12 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 8,400 in Performance Food Group on October 13, 2024 and sell it today you would lose (200.00) from holding Performance Food Group or give up 2.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.44% |
| Values | Daily Returns |
Performance Food Group vs. Merit Medical Systems
Performance |
| Timeline |
| Performance Food |
| Merit Medical Systems |
Performance Food and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Performance Food and Merit Medical
The main advantage of trading using opposite Performance Food and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food 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.| Performance Food vs. TIANDE CHEMICAL | Performance Food vs. TRAINLINE PLC LS | Performance Food vs. CHEMICAL INDUSTRIES | Performance Food vs. Broadcom |
| Merit Medical vs. Performance Food Group | Merit Medical vs. SQUIRREL MEDIA SA | Merit Medical vs. CNVISION MEDIA | Merit Medical vs. SENECA FOODS A |
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 Stocks Directory module to find actively traded stocks across global markets.
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