Correlation Between Merit Medical and GENERAL

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

Diversification Opportunities for Merit Medical and GENERAL

0.12

Correlation Coefficient

Merit Medical  GENERAL

Average diversification

The 3 months correlation between Merit and GENERAL is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Merit Medical i.e., Merit Medical and GENERAL go up and down completely randomly.

Pair Corralation between Merit Medical and GENERAL

Given the investment horizon of 90 days Merit Medical is expected to generate 6.41 times less return on investment than GENERAL. But when comparing it to its historical volatility, Merit Medical Systems is 2.57 times less risky than GENERAL. It trades about 0.05 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,965  in GENERAL ELEC CAP on September 15, 2024 and sell it today you would earn a total of  839.00  from holding GENERAL ELEC CAP or generate 9.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	45.31%
Values	Daily Returns

Merit Medical Systems  vs.  GENERAL ELEC CAP

Merit Medical Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Merit Medical is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

GENERAL ELEC CAP

Risk-Adjusted Performance

9 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GENERAL sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and GENERAL

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

The idea behind Merit Medical Systems and GENERAL ELEC CAP 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.