Correlation Between Catalent and Merit Medical

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

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

Diversification Opportunities for Catalent and Merit Medical

-0.03

Correlation Coefficient

Catalent  Merit Medical

Good diversification

The 3 months correlation between Catalent and Merit is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Catalent 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 Catalent 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 Catalent 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 Catalent i.e., Catalent and Merit Medical go up and down completely randomly.

Pair Corralation between Catalent and Merit Medical

Given the investment horizon of 90 days Catalent is expected to generate 1.44 times less return on investment than Merit Medical. But when comparing it to its historical volatility, Catalent is 2.32 times less risky than Merit Medical. It trades about 0.17 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,344  in Merit Medical Systems on September 22, 2024 and sell it today you would earn a total of  1,478  from holding Merit Medical Systems or generate 17.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

Catalent  vs.  Merit Medical Systems

Catalent

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Catalent and Merit Medical

The main advantage of trading using opposite Catalent and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent 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 Catalent 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 Commodity Directory module to find actively traded commodities issued by global exchanges.