Correlation Between Merit Medical and Hafnia

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

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

Diversification Opportunities for Merit Medical and Hafnia

-0.89

Correlation Coefficient

Merit Medical  Hafnia

Pay attention - limited upside

The 3 months correlation between Merit and Hafnia is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited and Merit Medical 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 Merit Medical Systems are associated (or correlated) with Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Merit Medical i.e., Merit Medical and Hafnia go up and down completely randomly.

Pair Corralation between Merit Medical and Hafnia

Assuming the 90 days trading horizon Merit Medical Systems is expected to under-perform the Hafnia. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 2.99 times less risky than Hafnia. The stock trades about -0.35 of its potential returns per unit of risk. The Hafnia Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  475.00  in Hafnia Limited on September 23, 2024 and sell it today you would earn a total of  23.00  from holding Hafnia Limited or generate 4.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	54.55%
Values	Daily Returns

Merit Medical Systems  vs.  Hafnia Limited

Merit Medical Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Merit Medical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Merit Medical and Hafnia

The main advantage of trading using opposite Merit Medical and Hafnia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Hafnia 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 Hafnia will offset losses from the drop in Hafnia's long position.

The idea behind Merit Medical Systems and Hafnia Limited 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.