Correlation Between Iridium Communications and Merit Medical
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
-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 Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Iridium Communications vs. Merit Medical Systems
Performance |
Timeline |
Iridium Communications |
Merit Medical Systems |
Iridium Communications and Merit Medical Volatility Contrast
Predicted Return Density |
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.Iridium Communications vs. IHS Holding | ||
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Check out your portfolio center.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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