Correlation Between Merit Medical and Microbot Medical

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

Diversification Opportunities for Merit Medical and Microbot Medical

0.54

Correlation Coefficient

Merit Medical  Microbot Medical

Very weak diversification

The 3 months correlation between Merit and Microbot is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Microbot Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microbot Medical 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 Microbot Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microbot Medical has no effect on the direction of Merit Medical i.e., Merit Medical and Microbot Medical go up and down completely randomly.

Pair Corralation between Merit Medical and Microbot Medical

Assuming the 90 days trading horizon Merit Medical Systems is expected to under-perform the Microbot Medical. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 2.2 times less risky than Microbot Medical. The stock trades about -0.35 of its potential returns per unit of risk. The Microbot Medical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Microbot Medical on September 23, 2024 and sell it today you would earn a total of  2.00  from holding Microbot Medical or generate 2.22% return on investment over 90 days.

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

Merit Medical Systems  vs.  Microbot Medical

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.

Microbot Medical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microbot Medical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Microbot Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and Microbot Medical

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

The idea behind Merit Medical Systems and Microbot Medical 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.