Correlation Between Mitsubishi Gas and Merit Medical

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

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

Diversification Opportunities for Mitsubishi Gas and Merit Medical

0.51

Correlation Coefficient

Mitsubishi Gas  Merit Medical

Very weak diversification

The 3 months correlation between Mitsubishi and Merit is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Gas Chemical and Merit Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merit Medical Systems and Mitsubishi Gas 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 Mitsubishi Gas Chemical are associated (or correlated) with Merit Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merit Medical Systems has no effect on the direction of Mitsubishi Gas i.e., Mitsubishi Gas and Merit Medical go up and down completely randomly.

Pair Corralation between Mitsubishi Gas and Merit Medical

Assuming the 90 days trading horizon Mitsubishi Gas is expected to generate 2.59 times less return on investment than Merit Medical. But when comparing it to its historical volatility, Mitsubishi Gas Chemical is 1.05 times less risky than Merit Medical. It trades about 0.06 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,550  in Merit Medical Systems on September 3, 2024 and sell it today you would earn a total of  1,200  from holding Merit Medical Systems or generate 14.04% return on investment over 90 days.

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

Mitsubishi Gas Chemical  vs.  Merit Medical Systems

Mitsubishi Gas Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Gas Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mitsubishi Gas is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Merit Medical Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Merit Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi Gas and Merit Medical

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

The idea behind Mitsubishi Gas Chemical and Merit Medical Systems 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.