Correlation Between Merit Medical and GPT

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

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

Diversification Opportunities for Merit Medical and GPT

-0.69

Correlation Coefficient

Merit Medical  GPT

Excellent diversification

The 3 months correlation between Merit and GPT is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and GPT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT Group and Merit Medical 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 Merit Medical Systems are associated (or correlated) with GPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Group has no effect on the direction of Merit Medical i.e., Merit Medical and GPT go up and down completely randomly.

Pair Corralation between Merit Medical and GPT

Assuming the 90 days trading horizon Merit Medical Systems is expected to generate 0.7 times more return on investment than GPT. However, Merit Medical Systems is 1.43 times less risky than GPT. It trades about 0.1 of its potential returns per unit of risk. GPT Group is currently generating about -0.12 per unit of risk. If you would invest  8,850  in Merit Medical Systems on September 15, 2024 and sell it today you would earn a total of  850.00  from holding Merit Medical Systems or generate 9.6% return on investment over 90 days.

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

Merit Medical Systems  vs.  GPT Group

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. In spite of comparatively uncertain basic indicators, Merit Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GPT Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Merit Medical and GPT

The main advantage of trading using opposite Merit Medical and GPT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, GPT 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 GPT will offset losses from the drop in GPT's long position.

The idea behind Merit Medical Systems and GPT Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.