Correlation Between Merit Medical and Cumulus Media

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

Diversification Opportunities for Merit Medical and Cumulus Media

-0.75

Correlation Coefficient

Merit Medical  Cumulus Media

Pay attention - limited upside

The 3 months correlation between Merit and Cumulus is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Cumulus Media Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumulus Media Class 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 Cumulus Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumulus Media Class has no effect on the direction of Merit Medical i.e., Merit Medical and Cumulus Media go up and down completely randomly.

Pair Corralation between Merit Medical and Cumulus Media

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.34 times more return on investment than Cumulus Media. However, Merit Medical Systems is 2.96 times less risky than Cumulus Media. It trades about 0.09 of its potential returns per unit of risk. Cumulus Media Class is currently generating about -0.13 per unit of risk. If you would invest  7,053  in Merit Medical Systems on September 23, 2024 and sell it today you would earn a total of  2,769  from holding Merit Medical Systems or generate 39.26% return on investment over 90 days.

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

Merit Medical Systems  vs.  Cumulus Media Class

Merit Medical Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merit Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Merit Medical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Cumulus Media Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cumulus Media Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Merit Medical and Cumulus Media

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

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