Correlation Between Merit Medical and Coor Service

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

Diversification Opportunities for Merit Medical and Coor Service

-0.82

Correlation Coefficient

Merit Medical  Coor Service

Pay attention - limited upside

The 3 months correlation between Merit and Coor is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Coor Service Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coor Service Management 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 Coor Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coor Service Management has no effect on the direction of Merit Medical i.e., Merit Medical and Coor Service go up and down completely randomly.

Pair Corralation between Merit Medical and Coor Service

Assuming the 90 days trading horizon Merit Medical Systems is expected to under-perform the Coor Service. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 1.02 times less risky than Coor Service. The stock trades about -0.19 of its potential returns per unit of risk. The Coor Service Management is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  295.00  in Coor Service Management on October 8, 2024 and sell it today you would earn a total of  11.00  from holding Coor Service Management or generate 3.73% return on investment over 90 days.

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

Merit Medical Systems  vs.  Coor Service Management

Merit Medical Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Merit Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Coor Service Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coor Service Management 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Merit Medical and Coor Service

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

The idea behind Merit Medical Systems and Coor Service Management 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.