Correlation Between Dave Busters and Merit Medical

Can any of the company-specific risk be diversified away by investing in both Dave Busters and Merit Medical 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 Dave Busters and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dave Busters Entertainment and Merit Medical Systems, you can compare the effects of market volatilities on Dave Busters and Merit Medical 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 Dave Busters with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dave Busters and Merit Medical.

Diversification Opportunities for Dave Busters and Merit Medical

0.21

Correlation Coefficient

Dave Busters  Merit Medical

Modest diversification

The 3 months correlation between Dave and Merit is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment and Merit Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merit Medical Systems and Dave Busters 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 Dave Busters Entertainment are associated (or correlated) with Merit Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merit Medical Systems has no effect on the direction of Dave Busters i.e., Dave Busters and Merit Medical go up and down completely randomly.

Pair Corralation between Dave Busters and Merit Medical

Given the investment horizon of 90 days Dave Busters Entertainment is expected to under-perform the Merit Medical. In addition to that, Dave Busters is 3.91 times more volatile than Merit Medical Systems. It trades about -0.02 of its total potential returns per unit of risk. Merit Medical Systems is currently generating about -0.01 per unit of volatility. If you would invest  9,883  in Merit Medical Systems on September 30, 2024 and sell it today you would lose (153.00) from holding Merit Medical Systems or give up 1.55% of portfolio value over 90 days.

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

Dave Busters Entertainment  vs.  Merit Medical Systems

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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

Pair Trading with Dave Busters and Merit Medical

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

The idea behind Dave Busters Entertainment and Merit Medical Systems 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.