Correlation Between Merit Medical and BJs Restaurants

Can any of the company-specific risk be diversified away by investing in both Merit Medical and BJs Restaurants 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 BJs Restaurants 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 BJs Restaurants, you can compare the effects of market volatilities on Merit Medical and BJs Restaurants 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 BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and BJs Restaurants.

Diversification Opportunities for Merit Medical and BJs Restaurants

0.41

Correlation Coefficient

Merit Medical  BJs Restaurants

Very weak diversification

The 3 months correlation between Merit and BJs is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants 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 BJs Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Restaurants has no effect on the direction of Merit Medical i.e., Merit Medical and BJs Restaurants go up and down completely randomly.

Pair Corralation between Merit Medical and BJs Restaurants

Given the investment horizon of 90 days Merit Medical is expected to generate 1.06 times less return on investment than BJs Restaurants. But when comparing it to its historical volatility, Merit Medical Systems is 1.64 times less risky than BJs Restaurants. It trades about 0.05 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,685  in BJs Restaurants on September 23, 2024 and sell it today you would earn a total of  790.00  from holding BJs Restaurants or generate 29.42% return on investment over 90 days.

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

Merit Medical Systems  vs.  BJs Restaurants

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 current stock price confusion, may contribute to short-horizon losses for the traders.

BJs Restaurants

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, BJs Restaurants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Merit Medical and BJs Restaurants

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

The idea behind Merit Medical Systems and BJs Restaurants 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .