Correlation Between Securitas and Merit Medical

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

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

Diversification Opportunities for Securitas and Merit Medical

0.7

Correlation Coefficient

Securitas  Merit Medical

Poor diversification

The 3 months correlation between Securitas and Merit is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Securitas AB 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 Securitas 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 Securitas AB 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 Securitas i.e., Securitas and Merit Medical go up and down completely randomly.

Pair Corralation between Securitas and Merit Medical

If you would invest  1,285  in Securitas AB on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Securitas AB or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Securitas AB  vs.  Merit Medical Systems

Securitas AB

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Securitas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly inconsistent fundamental drivers, Securitas reported solid returns over the last few months and may actually be approaching a breakup point.

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 Securitas and Merit Medical

The main advantage of trading using opposite Securitas and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Securitas 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 Securitas AB 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.