Correlation Between Merit Medical and Holdco Nuvo

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

Diversification Opportunities for Merit Medical and Holdco Nuvo

-0.2

Correlation Coefficient

Merit Medical  Holdco Nuvo

Good diversification

The 3 months correlation between Merit and Holdco is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Holdco Nuvo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holdco Nuvo 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 Holdco Nuvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holdco Nuvo Group has no effect on the direction of Merit Medical i.e., Merit Medical and Holdco Nuvo go up and down completely randomly.

Pair Corralation between Merit Medical and Holdco Nuvo

Given the investment horizon of 90 days Merit Medical is expected to generate 38.98 times less return on investment than Holdco Nuvo. But when comparing it to its historical volatility, Merit Medical Systems is 43.28 times less risky than Holdco Nuvo. It trades about 0.1 of its potential returns per unit of risk. Holdco Nuvo Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.10  in Holdco Nuvo Group on September 5, 2024 and sell it today you would lose (1.90) from holding Holdco Nuvo Group or give up 90.48% of portfolio value over 90 days.

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

Merit Medical Systems  vs.  Holdco Nuvo Group

Merit Medical Systems

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 8 (%) 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 January 2025.

Holdco Nuvo Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holdco Nuvo Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Holdco Nuvo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and Holdco Nuvo

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

The idea behind Merit Medical Systems and Holdco Nuvo 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.