Correlation Between Merit Medical and Unilever PLC

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

Diversification Opportunities for Merit Medical and Unilever PLC

0.18

Correlation Coefficient

Merit Medical  Unilever PLC

Average diversification

The 3 months correlation between Merit and Unilever is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC 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 Unilever PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever PLC has no effect on the direction of Merit Medical i.e., Merit Medical and Unilever PLC go up and down completely randomly.

Pair Corralation between Merit Medical and Unilever PLC

Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 1.03 times more return on investment than Unilever PLC. However, Merit Medical is 1.03 times more volatile than Unilever PLC. It trades about 0.05 of its potential returns per unit of risk. Unilever PLC is currently generating about 0.01 per unit of risk. If you would invest  9,150  in Merit Medical Systems on December 30, 2024 and sell it today you would earn a total of  400.00  from holding Merit Medical Systems or generate 4.37% return on investment over 90 days.

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

Merit Medical Systems  vs.  Unilever PLC

Merit Medical Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Unilever PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unilever PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Unilever PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Merit Medical and Unilever PLC

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

The idea behind Merit Medical Systems and Unilever PLC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.