Correlation Between Keurig Dr and Merit Medical

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

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

Diversification Opportunities for Keurig Dr and Merit Medical

-0.65

Correlation Coefficient

Keurig Dr  Merit Medical

Excellent diversification

The 3 months correlation between Keurig and Merit is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper 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 Keurig Dr 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 Keurig Dr Pepper 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 Keurig Dr i.e., Keurig Dr and Merit Medical go up and down completely randomly.

Pair Corralation between Keurig Dr and Merit Medical

Considering the 90-day investment horizon Keurig Dr is expected to generate 3.15 times less return on investment than Merit Medical. But when comparing it to its historical volatility, Keurig Dr Pepper is 1.45 times less risky than Merit Medical. It trades about 0.04 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,900  in Merit Medical Systems on September 21, 2024 and sell it today you would earn a total of  2,922  from holding Merit Medical Systems or generate 42.35% return on investment over 90 days.

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

Keurig Dr Pepper  vs.  Merit Medical Systems

Keurig Dr Pepper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keurig Dr Pepper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 Keurig Dr and Merit Medical

The main advantage of trading using opposite Keurig Dr and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr 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 Keurig Dr Pepper 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.