Correlation Between TEXAS ROADHOUSE and Merit Medical

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

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

Diversification Opportunities for TEXAS ROADHOUSE and Merit Medical

0.88

Correlation Coefficient

TEXAS ROADHOUSE  Merit Medical

Very poor diversification

The 3 months correlation between TEXAS and Merit is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE 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 TEXAS ROADHOUSE 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 TEXAS ROADHOUSE 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 TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and Merit Medical go up and down completely randomly.

Pair Corralation between TEXAS ROADHOUSE and Merit Medical

Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the Merit Medical. In addition to that, TEXAS ROADHOUSE is 1.01 times more volatile than Merit Medical Systems. It trades about -0.22 of its total potential returns per unit of risk. Merit Medical Systems is currently generating about -0.19 per unit of volatility. If you would invest  9,600  in Merit Medical Systems on October 8, 2024 and sell it today you would lose (400.00) from holding Merit Medical Systems or give up 4.17% of portfolio value over 90 days.

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

TEXAS ROADHOUSE  vs.  Merit Medical Systems

TEXAS ROADHOUSE

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TEXAS ROADHOUSE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TEXAS ROADHOUSE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Merit Medical Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Merit Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TEXAS ROADHOUSE and Merit Medical

The main advantage of trading using opposite TEXAS ROADHOUSE and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TEXAS ROADHOUSE 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 TEXAS ROADHOUSE 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.