Correlation Between Merit Medical and GLOBUS MEDICAL

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

Diversification Opportunities for Merit Medical and GLOBUS MEDICAL

0.66

Correlation Coefficient

Merit Medical  GLOBUS MEDICAL

Poor diversification

The 3 months correlation between Merit and GLOBUS is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and GLOBUS MEDICAL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLOBUS MEDICAL A 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 GLOBUS MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLOBUS MEDICAL A has no effect on the direction of Merit Medical i.e., Merit Medical and GLOBUS MEDICAL go up and down completely randomly.

Pair Corralation between Merit Medical and GLOBUS MEDICAL

Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 0.82 times more return on investment than GLOBUS MEDICAL. However, Merit Medical Systems is 1.23 times less risky than GLOBUS MEDICAL. It trades about -0.02 of its potential returns per unit of risk. GLOBUS MEDICAL A is currently generating about -0.11 per unit of risk. If you would invest  9,250  in Merit Medical Systems on December 22, 2024 and sell it today you would lose (250.00) from holding Merit Medical Systems or give up 2.7% of portfolio value over 90 days.

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

Merit Medical Systems  vs.  GLOBUS MEDICAL A

Merit Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merit Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Merit Medical is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

GLOBUS MEDICAL A

Risk-Adjusted Performance

Very Weak

Over the last 90 days GLOBUS MEDICAL A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Merit Medical and GLOBUS MEDICAL

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

The idea behind Merit Medical Systems and GLOBUS MEDICAL A 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .