Correlation Between Merit Medical and YHN Acquisition

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

Diversification Opportunities for Merit Medical and YHN Acquisition

0.54

Correlation Coefficient

Merit Medical  YHN Acquisition

Very weak diversification

The 3 months correlation between Merit and YHN is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and YHN Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YHN Acquisition I 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 YHN Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YHN Acquisition I has no effect on the direction of Merit Medical i.e., Merit Medical and YHN Acquisition go up and down completely randomly.

Pair Corralation between Merit Medical and YHN Acquisition

Given the investment horizon of 90 days Merit Medical Systems is expected to under-perform the YHN Acquisition. In addition to that, Merit Medical is 1.16 times more volatile than YHN Acquisition I. It trades about -0.24 of its total potential returns per unit of risk. YHN Acquisition I is currently generating about -0.08 per unit of volatility. If you would invest  1,030  in YHN Acquisition I on October 8, 2024 and sell it today you would lose (15.00) from holding YHN Acquisition I or give up 1.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.95%
Values	Daily Returns

Merit Medical Systems  vs.  YHN Acquisition I

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

YHN Acquisition I

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days YHN Acquisition I has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, YHN Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Merit Medical and YHN Acquisition

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

The idea behind Merit Medical Systems and YHN Acquisition I 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.