Correlation Between Merit Medical and Ipsen SA

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

Diversification Opportunities for Merit Medical and Ipsen SA

0.44

Correlation Coefficient

Merit Medical  Ipsen SA

Very weak diversification

The 3 months correlation between Merit and Ipsen is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Ipsen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipsen SA 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 Ipsen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ipsen SA has no effect on the direction of Merit Medical i.e., Merit Medical and Ipsen SA go up and down completely randomly.

Pair Corralation between Merit Medical and Ipsen SA

Assuming the 90 days trading horizon Merit Medical Systems is expected to under-perform the Ipsen SA. In addition to that, Merit Medical is 1.07 times more volatile than Ipsen SA. It trades about -0.02 of its total potential returns per unit of risk. Ipsen SA is currently generating about 0.03 per unit of volatility. If you would invest  10,910  in Ipsen SA on December 21, 2024 and sell it today you would earn a total of  230.00  from holding Ipsen SA or generate 2.11% 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.  Ipsen SA

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ipsen SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ipsen SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Ipsen SA is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Merit Medical and Ipsen SA

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

The idea behind Merit Medical Systems and Ipsen SA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.