Correlation Between KAUFMAN ET and Merit Medical

Can any of the company-specific risk be diversified away by investing in both KAUFMAN ET 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 KAUFMAN ET and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KAUFMAN ET BROAD and Merit Medical Systems, you can compare the effects of market volatilities on KAUFMAN ET 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 KAUFMAN ET with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAUFMAN ET and Merit Medical.

Diversification Opportunities for KAUFMAN ET and Merit Medical

-0.49

Correlation Coefficient

KAUFMAN ET  Merit Medical

Very good diversification

The 3 months correlation between KAUFMAN and Merit is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding KAUFMAN ET BROAD 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 KAUFMAN ET 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 KAUFMAN ET BROAD 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 KAUFMAN ET i.e., KAUFMAN ET and Merit Medical go up and down completely randomly.

Pair Corralation between KAUFMAN ET and Merit Medical

Assuming the 90 days trading horizon KAUFMAN ET BROAD is expected to under-perform the Merit Medical. But the stock apears to be less risky and, when comparing its historical volatility, KAUFMAN ET BROAD is 1.2 times less risky than Merit Medical. The stock trades about -0.13 of its potential returns per unit of risk. The Merit Medical Systems is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,600  in Merit Medical Systems on September 16, 2024 and sell it today you would earn a total of  100.00  from holding Merit Medical Systems or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

KAUFMAN ET BROAD  vs.  Merit Medical Systems

KAUFMAN ET BROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KAUFMAN ET BROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, KAUFMAN ET is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Merit Medical Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Merit Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KAUFMAN ET and Merit Medical

The main advantage of trading using opposite KAUFMAN ET and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAUFMAN ET 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.

The idea behind KAUFMAN ET BROAD and Merit Medical Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.