Correlation Between Merit Medical and EON Resources

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

Diversification Opportunities for Merit Medical and EON Resources

-0.26

Correlation Coefficient

Merit Medical  EON Resources

Very good diversification

The 3 months correlation between Merit and EON is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and EON Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EON Resources 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 EON Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EON Resources has no effect on the direction of Merit Medical i.e., Merit Medical and EON Resources go up and down completely randomly.

Pair Corralation between Merit Medical and EON Resources

Given the investment horizon of 90 days Merit Medical is expected to generate 1.06 times less return on investment than EON Resources. But when comparing it to its historical volatility, Merit Medical Systems is 6.89 times less risky than EON Resources. It trades about 0.05 of its potential returns per unit of risk. EON Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,031  in EON Resources on October 24, 2024 and sell it today you would lose (889.50) from holding EON Resources or give up 86.28% of portfolio value over 90 days.

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

Merit Medical Systems  vs.  EON Resources

Merit Medical Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Merit Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

EON Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EON Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, EON Resources is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Merit Medical and EON Resources

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

The idea behind Merit Medical Systems and EON Resources 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 Global Correlations module to find global opportunities by holding instruments from different markets.