Correlation Between Primoris Services and Merit Medical

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

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

Diversification Opportunities for Primoris Services and Merit Medical

-0.14

Correlation Coefficient

Primoris Services  Merit Medical

Good diversification

The 3 months correlation between Primoris and Merit is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Primoris Services 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 Primoris Services 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 Primoris Services 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 Primoris Services i.e., Primoris Services and Merit Medical go up and down completely randomly.

Pair Corralation between Primoris Services and Merit Medical

Given the investment horizon of 90 days Primoris Services is expected to under-perform the Merit Medical. In addition to that, Primoris Services is 2.64 times more volatile than Merit Medical Systems. It trades about -0.06 of its total potential returns per unit of risk. Merit Medical Systems is currently generating about -0.02 per unit of volatility. If you would invest  10,390  in Merit Medical Systems on November 28, 2024 and sell it today you would lose (187.00) from holding Merit Medical Systems or give up 1.8% of portfolio value over 90 days.

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

Primoris Services  vs.  Merit Medical Systems

Primoris Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Primoris Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Merit Medical Systems

Risk-Adjusted Performance

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.

Pair Trading with Primoris Services and Merit Medical

The main advantage of trading using opposite Primoris Services and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primoris Services 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 Primoris Services 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..