Correlation Between Merit Medical and Starbucks

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

Diversification Opportunities for Merit Medical and Starbucks

0.67

Correlation Coefficient

Merit Medical  Starbucks

Poor diversification

The 3 months correlation between Merit and Starbucks is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Merit Medical i.e., Merit Medical and Starbucks go up and down completely randomly.

Pair Corralation between Merit Medical and Starbucks

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 1.04 times more return on investment than Starbucks. However, Merit Medical is 1.04 times more volatile than Starbucks. It trades about -0.01 of its potential returns per unit of risk. Starbucks is currently generating about -0.07 per unit of risk. If you would invest  10,492  in Merit Medical Systems on October 26, 2024 and sell it today you would lose (125.00) from holding Merit Medical Systems or give up 1.19% of portfolio value over 90 days.

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

Merit Medical Systems  vs.  Starbucks

Merit Medical Systems

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 8 (%) 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.

Starbucks

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Starbucks is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merit Medical and Starbucks

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

The idea behind Merit Medical Systems and Starbucks 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 CEOs Directory module to screen CEOs from public companies around the world.