Correlation Between Merit Medical and Baldwin Insurance

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

Diversification Opportunities for Merit Medical and Baldwin Insurance

-0.24

Correlation Coefficient

Merit Medical  Baldwin Insurance

Very good diversification

The 3 months correlation between Merit and Baldwin is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and The Baldwin Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baldwin Insurance 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 Baldwin Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baldwin Insurance has no effect on the direction of Merit Medical i.e., Merit Medical and Baldwin Insurance go up and down completely randomly.

Pair Corralation between Merit Medical and Baldwin Insurance

Given the investment horizon of 90 days Merit Medical is expected to generate 1.39 times less return on investment than Baldwin Insurance. But when comparing it to its historical volatility, Merit Medical Systems is 1.67 times less risky than Baldwin Insurance. It trades about 0.08 of its potential returns per unit of risk. The Baldwin Insurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,386  in The Baldwin Insurance on October 5, 2024 and sell it today you would earn a total of  1,428  from holding The Baldwin Insurance or generate 59.85% return on investment over 90 days.

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

Merit Medical Systems  vs.  The Baldwin Insurance

Merit Medical Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Merit Medical is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Baldwin Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Baldwin Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Merit Medical and Baldwin Insurance

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

The idea behind Merit Medical Systems and The Baldwin Insurance 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.