Correlation Between Merit Medical and Lifevantage

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

Diversification Opportunities for Merit Medical and Lifevantage

0.5

Correlation Coefficient

Merit Medical  Lifevantage

Very weak diversification

The 3 months correlation between Merit and Lifevantage is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage 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 Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of Merit Medical i.e., Merit Medical and Lifevantage go up and down completely randomly.

Pair Corralation between Merit Medical and Lifevantage

Given the investment horizon of 90 days Merit Medical is expected to generate 5.43 times less return on investment than Lifevantage. But when comparing it to its historical volatility, Merit Medical Systems is 2.69 times less risky than Lifevantage. It trades about 0.05 of its potential returns per unit of risk. Lifevantage is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  341.00  in Lifevantage on September 21, 2024 and sell it today you would earn a total of  1,432  from holding Lifevantage or generate 419.94% 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.  Lifevantage

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

Lifevantage

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and Lifevantage

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

The idea behind Merit Medical Systems and Lifevantage 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.