Correlation Between Merit Medical and Freeport

Can any of the company-specific risk be diversified away by investing in both Merit Medical and Freeport 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 Freeport 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 Freeport McMoRan 5 percent, you can compare the effects of market volatilities on Merit Medical and Freeport 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 Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Freeport.

Diversification Opportunities for Merit Medical and Freeport

0.25

Correlation Coefficient

Merit Medical  Freeport

Modest diversification

The 3 months correlation between Merit and Freeport is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Freeport McMoRan 5 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 5 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 Freeport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan 5 has no effect on the direction of Merit Medical i.e., Merit Medical and Freeport go up and down completely randomly.

Pair Corralation between Merit Medical and Freeport

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 5.0 times more return on investment than Freeport. However, Merit Medical is 5.0 times more volatile than Freeport McMoRan 5 percent. It trades about 0.07 of its potential returns per unit of risk. Freeport McMoRan 5 percent is currently generating about 0.04 per unit of risk. If you would invest  9,808  in Merit Medical Systems on December 24, 2024 and sell it today you would earn a total of  636.00  from holding Merit Medical Systems or generate 6.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Merit Medical Systems  vs.  Freeport McMoRan 5 percent

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 5 (%) 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 April 2025.

Freeport McMoRan 5

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoRan 5 percent are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merit Medical and Freeport

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

The idea behind Merit Medical Systems and Freeport McMoRan 5 percent 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.