Correlation Between Merit Medical and Dine Brands

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

Diversification Opportunities for Merit Medical and Dine Brands

0.57

Correlation Coefficient

Merit Medical  Dine Brands

Very weak diversification

The 3 months correlation between Merit and Dine is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Dine Brands Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dine Brands Global 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 Dine Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dine Brands Global has no effect on the direction of Merit Medical i.e., Merit Medical and Dine Brands go up and down completely randomly.

Pair Corralation between Merit Medical and Dine Brands

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.66 times more return on investment than Dine Brands. However, Merit Medical Systems is 1.52 times less risky than Dine Brands. It trades about 0.05 of its potential returns per unit of risk. Dine Brands Global is currently generating about -0.04 per unit of risk. If you would invest  6,960  in Merit Medical Systems on September 23, 2024 and sell it today you would earn a total of  2,862  from holding Merit Medical Systems or generate 41.12% return on investment over 90 days.

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

Merit Medical Systems  vs.  Dine Brands Global

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Dine Brands Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Dine Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Merit Medical and Dine Brands

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

The idea behind Merit Medical Systems and Dine Brands Global 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.