Correlation Between Merit Medical and UPDATE SOFTWARE

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

Diversification Opportunities for Merit Medical and UPDATE SOFTWARE

-0.14

Correlation Coefficient

Merit Medical  UPDATE SOFTWARE

Good diversification

The 3 months correlation between Merit and UPDATE is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and UPDATE SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPDATE SOFTWARE 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 UPDATE SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPDATE SOFTWARE has no effect on the direction of Merit Medical i.e., Merit Medical and UPDATE SOFTWARE go up and down completely randomly.

Pair Corralation between Merit Medical and UPDATE SOFTWARE

Assuming the 90 days trading horizon Merit Medical Systems is expected to under-perform the UPDATE SOFTWARE. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 2.0 times less risky than UPDATE SOFTWARE. The stock trades about -0.02 of its potential returns per unit of risk. The UPDATE SOFTWARE is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,602  in UPDATE SOFTWARE on November 29, 2024 and sell it today you would lose (42.00) from holding UPDATE SOFTWARE or give up 2.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Merit Medical Systems  vs.  UPDATE SOFTWARE

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.

UPDATE SOFTWARE

Risk-Adjusted Performance

Very Weak

Over the last 90 days UPDATE SOFTWARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, UPDATE SOFTWARE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Merit Medical and UPDATE SOFTWARE

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

The idea behind Merit Medical Systems and UPDATE 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.