Correlation Between Olympic Steel and Merit Medical
Can any of the company-specific risk be diversified away by investing in both Olympic Steel 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 Olympic Steel and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Olympic Steel and Merit Medical Systems, you can compare the effects of market volatilities on Olympic Steel 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 Olympic Steel with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olympic Steel and Merit Medical.
Diversification Opportunities for Olympic Steel and Merit Medical
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Olympic and Merit is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Olympic Steel 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 Olympic Steel 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 Olympic Steel 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 Olympic Steel i.e., Olympic Steel and Merit Medical go up and down completely randomly.
Pair Corralation between Olympic Steel and Merit Medical
Given the investment horizon of 90 days Olympic Steel is expected to generate 3.07 times more return on investment than Merit Medical. However, Olympic Steel is 3.07 times more volatile than Merit Medical Systems. It trades about 0.23 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.21 per unit of risk. If you would invest 3,588 in Olympic Steel on September 1, 2024 and sell it today you would earn a total of 640.00 from holding Olympic Steel or generate 17.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Olympic Steel vs. Merit Medical Systems
Performance |
| Timeline |
| Olympic Steel |
| Merit Medical Systems |
Olympic Steel and Merit Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Olympic Steel and Merit Medical
The main advantage of trading using opposite Olympic Steel and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Olympic Steel 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.| Olympic Steel vs. Fortitude Gold Corp | Olympic Steel vs. New Gold | Olympic Steel vs. Galiano Gold | Olympic Steel vs. GoldMining |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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