Correlation Between ALLSTATE and Merit Medical

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

By analyzing existing cross correlation between ALLSTATE P 555 and Merit Medical Systems, you can compare the effects of market volatilities on ALLSTATE 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 ALLSTATE with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALLSTATE and Merit Medical.

Diversification Opportunities for ALLSTATE and Merit Medical

0.1

Correlation Coefficient

ALLSTATE  Merit Medical

Average diversification

The 3 months correlation between ALLSTATE and Merit is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding ALLSTATE P 555 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 ALLSTATE 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 ALLSTATE P 555 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 ALLSTATE i.e., ALLSTATE and Merit Medical go up and down completely randomly.

Pair Corralation between ALLSTATE and Merit Medical

Assuming the 90 days trading horizon ALLSTATE is expected to generate 3.07 times less return on investment than Merit Medical. But when comparing it to its historical volatility, ALLSTATE P 555 is 1.1 times less risky than Merit Medical. It trades about 0.03 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,808  in Merit Medical Systems on December 24, 2024 and sell it today you would earn a total of  636.00  from holding Merit Medical Systems or generate 6.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

ALLSTATE P 555  vs.  Merit Medical Systems

ALLSTATE P 555

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALLSTATE P 555 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ALLSTATE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Merit Medical Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 5 (%) 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 April 2025.

Pair Trading with ALLSTATE and Merit Medical

The main advantage of trading using opposite ALLSTATE and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALLSTATE 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 ALLSTATE P 555 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.