Correlation Between Merit Medical and Kingdee International

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

Diversification Opportunities for Merit Medical and Kingdee International

0.48

Correlation Coefficient

Merit Medical  Kingdee International

Very weak diversification

The 3 months correlation between Merit and Kingdee is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Kingdee International Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingdee International 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 Kingdee International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingdee International has no effect on the direction of Merit Medical i.e., Merit Medical and Kingdee International go up and down completely randomly.

Pair Corralation between Merit Medical and Kingdee International

Assuming the 90 days trading horizon Merit Medical is expected to generate 1.26 times less return on investment than Kingdee International. But when comparing it to its historical volatility, Merit Medical Systems is 2.06 times less risky than Kingdee International. It trades about 0.13 of its potential returns per unit of risk. Kingdee International Software is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  96.00  in Kingdee International Software on October 25, 2024 and sell it today you would earn a total of  14.00  from holding Kingdee International Software or generate 14.58% 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.  Kingdee International Software

Merit Medical Systems

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Merit Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kingdee International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kingdee International Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Kingdee International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and Kingdee International

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

The idea behind Merit Medical Systems and Kingdee International Software 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.