Correlation Between Seadrill and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Seadrill 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 Seadrill and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seadrill Limited and Merit Medical Systems, you can compare the effects of market volatilities on Seadrill 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 Seadrill with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seadrill and Merit Medical.
Diversification Opportunities for Seadrill and Merit Medical
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Seadrill and Merit is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited 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 Seadrill 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 Seadrill Limited 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 Seadrill i.e., Seadrill and Merit Medical go up and down completely randomly.
Pair Corralation between Seadrill and Merit Medical
Given the investment horizon of 90 days Seadrill Limited is expected to generate 1.49 times more return on investment than Merit Medical. However, Seadrill is 1.49 times more volatile than Merit Medical Systems. It trades about 0.04 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.05 per unit of risk. If you would invest 2,911 in Seadrill Limited on September 2, 2024 and sell it today you would earn a total of 1,153 from holding Seadrill Limited or generate 39.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seadrill Limited vs. Merit Medical Systems
Performance |
| Timeline |
| Seadrill Limited |
| Merit Medical Systems |
Seadrill and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seadrill and Merit Medical
The main advantage of trading using opposite Seadrill and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill 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.| Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
| Merit Medical vs. Profound Medical Corp | Merit Medical vs. Si Bone | Merit Medical vs. Nevro Corp | Merit Medical vs. Orthopediatrics Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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