Correlation Between Apple and Merit Medical

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

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

Diversification Opportunities for Apple and Merit Medical

-0.53

Correlation Coefficient

Apple  Merit Medical

Excellent diversification

The 3 months correlation between Apple and Merit is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Apple 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 Apple 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 Apple 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 Apple i.e., Apple and Merit Medical go up and down completely randomly.

Pair Corralation between Apple and Merit Medical

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.85 times more return on investment than Merit Medical. However, Apple Inc is 1.18 times less risky than Merit Medical. It trades about 0.08 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.06 per unit of risk. If you would invest  13,871  in Apple Inc on December 2, 2024 and sell it today you would earn a total of  8,884  from holding Apple Inc or generate 64.05% return on investment over 90 days.

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

Apple Inc  vs.  Merit Medical Systems

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Apple is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Merit Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merit Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Merit Medical is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Merit Medical

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

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.