Correlation Between Merit Medical and TruBridge

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

Diversification Opportunities for Merit Medical and TruBridge

0.38

Correlation Coefficient

Merit Medical  TruBridge

Weak diversification

The 3 months correlation between Merit and TruBridge is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and TruBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TruBridge 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 TruBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TruBridge has no effect on the direction of Merit Medical i.e., Merit Medical and TruBridge go up and down completely randomly.

Pair Corralation between Merit Medical and TruBridge

Given the investment horizon of 90 days Merit Medical is expected to generate 10.64 times less return on investment than TruBridge. But when comparing it to its historical volatility, Merit Medical Systems is 1.64 times less risky than TruBridge. It trades about 0.04 of its potential returns per unit of risk. TruBridge is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,819  in TruBridge on December 20, 2024 and sell it today you would earn a total of  894.00  from holding TruBridge or generate 49.15% return on investment over 90 days.

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

Merit Medical Systems  vs.  TruBridge

Merit Medical Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 3 (%) 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.

TruBridge

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TruBridge are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, TruBridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and TruBridge

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

The idea behind Merit Medical Systems and TruBridge 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.