Correlation Between Merit Medical and Astral Foods

Can any of the company-specific risk be diversified away by investing in both Merit Medical and Astral Foods 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 Astral Foods 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 Astral Foods Limited, you can compare the effects of market volatilities on Merit Medical and Astral Foods 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 Astral Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Astral Foods.

Diversification Opportunities for Merit Medical and Astral Foods

0.31

Correlation Coefficient

Merit Medical  Astral Foods

Weak diversification

The 3 months correlation between Merit and Astral is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Astral Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods 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 Astral Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astral Foods Limited has no effect on the direction of Merit Medical i.e., Merit Medical and Astral Foods go up and down completely randomly.

Pair Corralation between Merit Medical and Astral Foods

Assuming the 90 days trading horizon Merit Medical is expected to generate 10.33 times less return on investment than Astral Foods. But when comparing it to its historical volatility, Merit Medical Systems is 10.04 times less risky than Astral Foods. It trades about 0.13 of its potential returns per unit of risk. Astral Foods Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  362.00  in Astral Foods Limited on October 22, 2024 and sell it today you would earn a total of  508.00  from holding Astral Foods Limited or generate 140.33% return on investment over 90 days.

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

Merit Medical Systems  vs.  Astral Foods Limited

Merit Medical Systems

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Merit Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Astral Foods Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Astral Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and Astral Foods

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

The idea behind Merit Medical Systems and Astral Foods 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.