Correlation Between Computershare and Merit Medical

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

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

Diversification Opportunities for Computershare and Merit Medical

0.83

Correlation Coefficient

Computershare  Merit Medical

Very poor diversification

The 3 months correlation between Computershare and Merit is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Computershare Limited 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 Computershare 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 Computershare Limited 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 Computershare i.e., Computershare and Merit Medical go up and down completely randomly.

Pair Corralation between Computershare and Merit Medical

Assuming the 90 days horizon Computershare Limited is expected to generate 1.12 times more return on investment than Merit Medical. However, Computershare is 1.12 times more volatile than Merit Medical Systems. It trades about 0.13 of its potential returns per unit of risk. Merit Medical Systems is currently generating about 0.15 per unit of risk. If you would invest  1,700  in Computershare Limited on September 4, 2024 and sell it today you would earn a total of  250.00  from holding Computershare Limited or generate 14.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Computershare Limited  vs.  Merit Medical Systems

Computershare Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Computershare reported solid returns over the last few months and may actually be approaching a breakup point.

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 Computershare and Merit Medical

The main advantage of trading using opposite Computershare and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computershare 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 Computershare Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.