Correlation Between Iridium Communications and Merit Medical

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

Diversification Opportunities for Iridium Communications and Merit Medical

IridiumMeritDiversified AwayIridiumMeritDiversified Away100%
-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between Iridium and Merit is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications 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 Iridium Communications 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 Iridium Communications 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 Iridium Communications i.e., Iridium Communications and Merit Medical go up and down completely randomly.

Pair Corralation between Iridium Communications and Merit Medical

Given the investment horizon of 90 days Iridium Communications is expected to generate 2.34 times more return on investment than Merit Medical. However, Iridium Communications is 2.34 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  2,730  in Iridium Communications on September 18, 2024 and sell it today you would earn a total of  290.00  from holding Iridium Communications or generate 10.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Iridium Communications  vs.  Merit Medical Systems

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0510152025
JavaScript chart by amCharts 3.21.15IRDM MMSI
       Timeline  
Iridium Communications 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Iridium Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec272829303132333435
Merit Medical Systems 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec949698100102104106108

Iridium Communications and Merit Medical Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.61-6.45-4.29-2.130.0362.184.436.688.9311.18 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15IRDM MMSI
       Returns  

Pair Trading with Iridium Communications and Merit Medical

The main advantage of trading using opposite Iridium Communications and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications 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 Iridium Communications 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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