Correlation Between Precision Optics, and Merit Medical

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

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

Diversification Opportunities for Precision Optics, and Merit Medical

0.59

Correlation Coefficient

Precision Optics,  Merit Medical

Very weak diversification

The 3 months correlation between Precision and Merit is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Precision Optics, 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 Precision Optics, 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 Precision Optics, 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 Precision Optics, i.e., Precision Optics, and Merit Medical go up and down completely randomly.

Pair Corralation between Precision Optics, and Merit Medical

Given the investment horizon of 90 days Precision Optics, is expected to generate 2.62 times more return on investment than Merit Medical. However, Precision Optics, is 2.62 times more volatile than Merit Medical Systems. It trades about 0.08 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.09 per unit of risk. If you would invest  420.00  in Precision Optics, on October 22, 2024 and sell it today you would earn a total of  69.00  from holding Precision Optics, or generate 16.43% return on investment over 90 days.

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

Precision Optics,  vs.  Merit Medical Systems

Precision Optics,

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Optics, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, Precision Optics, demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Merit Medical Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 7 (%) 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 February 2025.

Pair Trading with Precision Optics, and Merit Medical

The main advantage of trading using opposite Precision Optics, and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Optics, 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 Precision Optics, 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.