Correlation Between China Resources and Merit Medical

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

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

Diversification Opportunities for China Resources and Merit Medical

-0.39

Correlation Coefficient

China Resources  Merit Medical

Very good diversification

The 3 months correlation between China and Merit is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer 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 China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and Merit Medical go up and down completely randomly.

Pair Corralation between China Resources and Merit Medical

Assuming the 90 days horizon China Resources Beer is expected to generate 1.8 times more return on investment than Merit Medical. However, China Resources is 1.8 times more volatile than Merit Medical Systems. It trades about 0.07 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.05 per unit of risk. If you would invest  310.00  in China Resources Beer on December 29, 2024 and sell it today you would earn a total of  30.00  from holding China Resources Beer or generate 9.68% return on investment over 90 days.

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

China Resources Beer  vs.  Merit Medical Systems

China Resources Beer

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Merit Medical Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Merit Medical is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with China Resources and Merit Medical

The main advantage of trading using opposite China Resources and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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 China Resources Beer 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.