Correlation Between ResMed and Merit Medical
Can any of the company-specific risk be diversified away by investing in both ResMed 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 ResMed and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ResMed Inc and Merit Medical Systems, you can compare the effects of market volatilities on ResMed 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 ResMed with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ResMed and Merit Medical.
Diversification Opportunities for ResMed and Merit Medical
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ResMed and Merit is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ResMed Inc 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 ResMed 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 ResMed Inc 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 ResMed i.e., ResMed and Merit Medical go up and down completely randomly.
Pair Corralation between ResMed and Merit Medical
Considering the 90-day investment horizon ResMed is expected to generate 1.15 times less return on investment than Merit Medical. But when comparing it to its historical volatility, ResMed Inc is 1.14 times less risky than Merit Medical. It trades about 0.49 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 9,607 in Merit Medical Systems on November 2, 2024 and sell it today you would earn a total of 1,422 from holding Merit Medical Systems or generate 14.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ResMed Inc vs. Merit Medical Systems
Performance |
| Timeline |
| ResMed Inc |
| Merit Medical Systems |
ResMed and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ResMed and Merit Medical
The main advantage of trading using opposite ResMed and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ResMed 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.| ResMed vs. Teleflex Incorporated | ResMed vs. West Pharmaceutical Services | ResMed vs. Alcon AG | ResMed vs. ICU Medical |
| Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies, | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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