Correlation Between Azul SA and Merit Medical

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

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

Diversification Opportunities for Azul SA and Merit Medical

-0.74

Correlation Coefficient

Azul SA  Merit Medical

Pay attention - limited upside

The 3 months correlation between Azul and Merit is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Azul SA 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 Azul SA 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 Azul SA 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 Azul SA i.e., Azul SA and Merit Medical go up and down completely randomly.

Pair Corralation between Azul SA and Merit Medical

Given the investment horizon of 90 days Azul SA is expected to under-perform the Merit Medical. In addition to that, Azul SA is 3.17 times more volatile than Merit Medical Systems. It trades about -0.03 of its total potential returns per unit of risk. Merit Medical Systems is currently generating about 0.05 per unit of volatility. If you would invest  7,086  in Merit Medical Systems on September 19, 2024 and sell it today you would earn a total of  2,627  from holding Merit Medical Systems or generate 37.07% return on investment over 90 days.

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

Azul SA  vs.  Merit Medical Systems

Azul SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azul SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Merit Medical Systems

Risk-Adjusted Performance

0 of 100

Very 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.

Pair Trading with Azul SA and Merit Medical

The main advantage of trading using opposite Azul SA and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azul SA 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 Azul SA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.