Correlation Between Merit Medical and Venus Concept

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

Diversification Opportunities for Merit Medical and Venus Concept

-0.07

Correlation Coefficient

Merit Medical  Venus Concept

Good diversification

The 3 months correlation between Merit and Venus is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Venus Concept in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Venus Concept 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 Venus Concept. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Venus Concept has no effect on the direction of Merit Medical i.e., Merit Medical and Venus Concept go up and down completely randomly.

Pair Corralation between Merit Medical and Venus Concept

Given the investment horizon of 90 days Merit Medical is expected to generate 1.12 times less return on investment than Venus Concept. But when comparing it to its historical volatility, Merit Medical Systems is 8.16 times less risky than Venus Concept. It trades about 0.08 of its potential returns per unit of risk. Venus Concept is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  396.00  in Venus Concept on December 28, 2024 and sell it today you would lose (117.00) from holding Venus Concept or give up 29.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Merit Medical Systems  vs.  Venus Concept

Merit Medical Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 6 (%) 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.

Venus Concept

Risk-Adjusted Performance

Weak

Over the last 90 days Venus Concept has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Venus Concept may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Merit Medical and Venus Concept

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

The idea behind Merit Medical Systems and Venus Concept 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.