Correlation Between Anheuser Busch and Merit Medical

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

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

Diversification Opportunities for Anheuser Busch and Merit Medical

-0.77

Correlation Coefficient

Anheuser Busch  Merit Medical

Pay attention - limited upside

The 3 months correlation between Anheuser and Merit is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev 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 Anheuser Busch 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 Anheuser Busch Inbev 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 Anheuser Busch i.e., Anheuser Busch and Merit Medical go up and down completely randomly.

Pair Corralation between Anheuser Busch and Merit Medical

Considering the 90-day investment horizon Anheuser Busch Inbev is expected to under-perform the Merit Medical. But the stock apears to be less risky and, when comparing its historical volatility, Anheuser Busch Inbev is 1.18 times less risky than Merit Medical. The stock trades about -0.37 of its potential returns per unit of risk. The Merit Medical Systems is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  10,503  in Merit Medical Systems on September 22, 2024 and sell it today you would lose (681.00) from holding Merit Medical Systems or give up 6.48% of portfolio value over 90 days.

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

Anheuser Busch Inbev  vs.  Merit Medical Systems

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Anheuser Busch and Merit Medical

The main advantage of trading using opposite Anheuser Busch and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch 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 Anheuser Busch Inbev 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.