Correlation Between Merit Medical and Willamette Valley

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

Diversification Opportunities for Merit Medical and Willamette Valley

-0.72

Correlation Coefficient

Merit Medical  Willamette Valley

Pay attention - limited upside

The 3 months correlation between Merit and Willamette is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Merit Medical i.e., Merit Medical and Willamette Valley go up and down completely randomly.

Pair Corralation between Merit Medical and Willamette Valley

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.71 times more return on investment than Willamette Valley. However, Merit Medical Systems is 1.42 times less risky than Willamette Valley. It trades about 0.09 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.06 per unit of risk. If you would invest  6,900  in Merit Medical Systems on September 21, 2024 and sell it today you would earn a total of  2,922  from holding Merit Medical Systems or generate 42.35% return on investment over 90 days.

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

Merit Medical Systems  vs.  Willamette Valley Vineyards

Merit Medical Systems

Risk-Adjusted Performance

0 of 100

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Merit Medical and Willamette Valley

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

The idea behind Merit Medical Systems and Willamette Valley Vineyards 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.