Correlation Between Merit Medical and LQR House

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

Diversification Opportunities for Merit Medical and LQR House

0.42

Correlation Coefficient

Merit Medical  LQR House

Very weak diversification

The 3 months correlation between Merit and LQR is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and LQR House Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LQR House Common 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 LQR House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LQR House Common has no effect on the direction of Merit Medical i.e., Merit Medical and LQR House go up and down completely randomly.

Pair Corralation between Merit Medical and LQR House

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.15 times more return on investment than LQR House. However, Merit Medical Systems is 6.46 times less risky than LQR House. It trades about 0.05 of its potential returns per unit of risk. LQR House Common is currently generating about -0.08 per unit of risk. If you would invest  6,997  in Merit Medical Systems on October 7, 2024 and sell it today you would earn a total of  2,592  from holding Merit Medical Systems or generate 37.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	70.77%
Values	Daily Returns

Merit Medical Systems  vs.  LQR House Common

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

LQR House Common

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LQR House Common are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, LQR House reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and LQR House

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

The idea behind Merit Medical Systems and LQR House Common 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.