Correlation Between Merit Medical and Mastercard

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

Diversification Opportunities for Merit Medical and Mastercard

0.81

Correlation Coefficient

Merit Medical  Mastercard

Very poor diversification

The 3 months correlation between Merit and Mastercard is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Merit Medical i.e., Merit Medical and Mastercard go up and down completely randomly.

Pair Corralation between Merit Medical and Mastercard

Assuming the 90 days trading horizon Merit Medical is expected to generate 1.21 times less return on investment than Mastercard. In addition to that, Merit Medical is 1.29 times more volatile than Mastercard. It trades about 0.1 of its total potential returns per unit of risk. Mastercard is currently generating about 0.15 per unit of volatility. If you would invest  41,009  in Mastercard on October 4, 2024 and sell it today you would earn a total of  9,941  from holding Mastercard or generate 24.24% return on investment over 90 days.

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

Merit Medical Systems  vs.  Mastercard

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.

Mastercard

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mastercard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and Mastercard

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

The idea behind Merit Medical Systems and Mastercard 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.