Correlation Between Merit Medical and Milestone Scientific

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

Diversification Opportunities for Merit Medical and Milestone Scientific

0.41

Correlation Coefficient

Merit Medical  Milestone Scientific

Very weak diversification

The 3 months correlation between Merit and Milestone is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Milestone Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Milestone Scientific 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 Milestone Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Milestone Scientific has no effect on the direction of Merit Medical i.e., Merit Medical and Milestone Scientific go up and down completely randomly.

Pair Corralation between Merit Medical and Milestone Scientific

Given the investment horizon of 90 days Merit Medical Systems is expected to under-perform the Milestone Scientific. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 3.92 times less risky than Milestone Scientific. The stock trades about -0.02 of its potential returns per unit of risk. The Milestone Scientific is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Milestone Scientific on November 28, 2024 and sell it today you would lose (3.00) from holding Milestone Scientific or give up 3.03% of portfolio value over 90 days.

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

Merit Medical Systems  vs.  Milestone Scientific

Merit Medical Systems

Risk-Adjusted Performance

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.

Milestone Scientific

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Milestone Scientific are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Milestone Scientific is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Merit Medical and Milestone Scientific

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

The idea behind Merit Medical Systems and Milestone Scientific 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.