Correlation Between Merit Medical and Thai Beverage

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

Diversification Opportunities for Merit Medical and Thai Beverage

-0.34

Correlation Coefficient

Merit Medical  Thai Beverage

Very good diversification

The 3 months correlation between Merit and Thai is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Thai Beverage Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage Public 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 Thai Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Beverage Public has no effect on the direction of Merit Medical i.e., Merit Medical and Thai Beverage go up and down completely randomly.

Pair Corralation between Merit Medical and Thai Beverage

Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 0.43 times more return on investment than Thai Beverage. However, Merit Medical Systems is 2.34 times less risky than Thai Beverage. It trades about -0.07 of its potential returns per unit of risk. Thai Beverage Public is currently generating about -0.05 per unit of risk. If you would invest  9,900  in Merit Medical Systems on December 1, 2024 and sell it today you would lose (600.00) from holding Merit Medical Systems or give up 6.06% of portfolio value over 90 days.

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

Merit Medical Systems  vs.  Thai Beverage Public

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.

Thai Beverage Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Beverage Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Merit Medical and Thai Beverage

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

The idea behind Merit Medical Systems and Thai Beverage Public 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.