Correlation Between Arm Holdings and Merit Medical

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Can any of the company-specific risk be diversified away by investing in both Arm Holdings 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 Arm Holdings and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arm Holdings plc and Merit Medical Systems, you can compare the effects of market volatilities on Arm Holdings 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 Arm Holdings with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arm Holdings and Merit Medical.

Diversification Opportunities for Arm Holdings and Merit Medical

ArmMeritDiversified AwayArmMeritDiversified Away100%
-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Arm and Merit is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc 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 Arm Holdings 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 Arm Holdings plc 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 Arm Holdings i.e., Arm Holdings and Merit Medical go up and down completely randomly.

Pair Corralation between Arm Holdings and Merit Medical

Considering the 90-day investment horizon Arm Holdings plc is expected to under-perform the Merit Medical. In addition to that, Arm Holdings is 2.51 times more volatile than Merit Medical Systems. It trades about -0.04 of its total potential returns per unit of risk. Merit Medical Systems is currently generating about 0.01 per unit of volatility. If you would invest  9,525  in Merit Medical Systems on October 16, 2024 and sell it today you would earn a total of  39.00  from holding Merit Medical Systems or generate 0.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Arm Holdings plc  vs.  Merit Medical Systems

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-5051015
JavaScript chart by amCharts 3.21.15ARM MMSI
       Timeline  
Arm Holdings plc 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Arm Holdings plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan125130135140145150155160
Merit Medical Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Merit Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Merit Medical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan949698100102104106108

Arm Holdings and Merit Medical Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-10.7-8.01-5.33-2.640.02.575.287.9810.6913.4 0.050.100.150.20
JavaScript chart by amCharts 3.21.15ARM MMSI
       Returns  

Pair Trading with Arm Holdings and Merit Medical

The main advantage of trading using opposite Arm Holdings and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arm Holdings 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 Arm Holdings plc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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