Correlation Between JetBlue Airways and Merit Medical

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

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

Diversification Opportunities for JetBlue Airways and Merit Medical

-0.32

Correlation Coefficient

JetBlue Airways  Merit Medical

Very good diversification

The 3 months correlation between JetBlue and Merit is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding JetBlue Airways Corp 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 JetBlue Airways 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 JetBlue Airways Corp 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 JetBlue Airways i.e., JetBlue Airways and Merit Medical go up and down completely randomly.

Pair Corralation between JetBlue Airways and Merit Medical

Given the investment horizon of 90 days JetBlue Airways Corp is expected to generate 3.3 times more return on investment than Merit Medical. However, JetBlue Airways is 3.3 times more volatile than Merit Medical Systems. It trades about 0.12 of its potential returns per unit of risk. Merit Medical Systems is currently generating about -0.24 per unit of risk. If you would invest  639.00  in JetBlue Airways Corp on September 19, 2024 and sell it today you would earn a total of  61.00  from holding JetBlue Airways Corp or generate 9.55% return on investment over 90 days.

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

JetBlue Airways Corp  vs.  Merit Medical Systems

JetBlue Airways Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JetBlue Airways Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, JetBlue Airways unveiled solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with JetBlue Airways and Merit Medical

The main advantage of trading using opposite JetBlue Airways and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JetBlue Airways 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 JetBlue Airways Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.