Correlation Between Merit Medical and Franklin Wireless

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

Diversification Opportunities for Merit Medical and Franklin Wireless

0.01

Correlation Coefficient

Merit Medical  Franklin Wireless

Significant diversification

The 3 months correlation between Merit and Franklin is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Franklin Wireless Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Wireless Corp 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 Franklin Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Wireless Corp has no effect on the direction of Merit Medical i.e., Merit Medical and Franklin Wireless go up and down completely randomly.

Pair Corralation between Merit Medical and Franklin Wireless

Given the investment horizon of 90 days Merit Medical is expected to generate 1.73 times less return on investment than Franklin Wireless. But when comparing it to its historical volatility, Merit Medical Systems is 1.52 times less risky than Franklin Wireless. It trades about 0.01 of its potential returns per unit of risk. Franklin Wireless Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  450.00  in Franklin Wireless Corp on September 25, 2024 and sell it today you would lose (1.00) from holding Franklin Wireless Corp or give up 0.22% of portfolio value over 90 days.

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

Merit Medical Systems  vs.  Franklin Wireless Corp

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.

Franklin Wireless Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Wireless Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Franklin Wireless is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Merit Medical and Franklin Wireless

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

The idea behind Merit Medical Systems and Franklin Wireless Corp 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 CEOs Directory module to screen CEOs from public companies around the world.