Correlation Between Merit Medical and Meiko Electronics

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

Diversification Opportunities for Merit Medical and Meiko Electronics

0.86

Correlation Coefficient

Merit Medical  Meiko Electronics

Very poor diversification

The 3 months correlation between Merit and Meiko is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics 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 Meiko Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meiko Electronics has no effect on the direction of Merit Medical i.e., Merit Medical and Meiko Electronics go up and down completely randomly.

Pair Corralation between Merit Medical and Meiko Electronics

Assuming the 90 days trading horizon Merit Medical is expected to generate 3.1 times less return on investment than Meiko Electronics. But when comparing it to its historical volatility, Merit Medical Systems is 1.83 times less risky than Meiko Electronics. It trades about 0.05 of its potential returns per unit of risk. Meiko Electronics Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,860  in Meiko Electronics Co on October 4, 2024 and sell it today you would earn a total of  3,690  from holding Meiko Electronics Co or generate 198.39% 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.  Meiko Electronics Co

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.

Meiko Electronics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meiko Electronics Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meiko Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and Meiko Electronics

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

The idea behind Merit Medical Systems and Meiko Electronics Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.