Correlation Between Merit Medical and AM EAGLE

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

Diversification Opportunities for Merit Medical and AM EAGLE

-0.63

Correlation Coefficient

Merit Medical  AM EAGLE

Excellent diversification

The 3 months correlation between Merit and AFG is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and AM EAGLE OUTFITTERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AM EAGLE OUTFITTERS 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 AM EAGLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AM EAGLE OUTFITTERS has no effect on the direction of Merit Medical i.e., Merit Medical and AM EAGLE go up and down completely randomly.

Pair Corralation between Merit Medical and AM EAGLE

Assuming the 90 days trading horizon Merit Medical Systems is expected to under-perform the AM EAGLE. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 3.05 times less risky than AM EAGLE. The stock trades about -0.35 of its potential returns per unit of risk. The AM EAGLE OUTFITTERS is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,700  in AM EAGLE OUTFITTERS on September 23, 2024 and sell it today you would lose (100.00) from holding AM EAGLE OUTFITTERS or give up 5.88% of portfolio value over 90 days.

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

Merit Medical Systems  vs.  AM EAGLE OUTFITTERS

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.

AM EAGLE OUTFITTERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AM EAGLE OUTFITTERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Merit Medical and AM EAGLE

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

The idea behind Merit Medical Systems and AM EAGLE OUTFITTERS 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.