Correlation Between Warner Music and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Warner Music 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 Warner Music and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Warner Music Group and Merit Medical Systems, you can compare the effects of market volatilities on Warner Music 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 Warner Music with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warner Music and Merit Medical.
Diversification Opportunities for Warner Music and Merit Medical
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Warner and Merit is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music 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 Warner Music 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 Warner Music 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 Warner Music i.e., Warner Music and Merit Medical go up and down completely randomly.
Pair Corralation between Warner Music and Merit Medical
Considering the 90-day investment horizon Warner Music Group is expected to under-perform the Merit Medical. In addition to that, Warner Music is 1.29 times more volatile than Merit Medical Systems. It trades about 0.0 of its total potential returns per unit of risk. Merit Medical Systems is currently generating about 0.13 per unit of volatility. If you would invest 6,878 in Merit Medical Systems on September 4, 2024 and sell it today you would earn a total of 3,605 from holding Merit Medical Systems or generate 52.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Warner Music Group vs. Merit Medical Systems
Performance |
| Timeline |
| Warner Music Group |
| Merit Medical Systems |
Warner Music and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Warner Music and Merit Medical
The main advantage of trading using opposite Warner Music and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music 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.| Warner Music vs. News Corp A | Warner Music vs. Marcus | Warner Music vs. Liberty Media | Warner Music vs. Fox Corp Class |
| 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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