Correlation Between Merit Medical and Ambow Education
Can any of the company-specific risk be diversified away by investing in both Merit Medical and Ambow Education 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 Ambow Education 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 Ambow Education Holding, you can compare the effects of market volatilities on Merit Medical and Ambow Education 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 Ambow Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and Ambow Education.
Diversification Opportunities for Merit Medical and Ambow Education
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Merit and Ambow is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Ambow Education Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambow Education Holding 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 Ambow Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambow Education Holding has no effect on the direction of Merit Medical i.e., Merit Medical and Ambow Education go up and down completely randomly.
Pair Corralation between Merit Medical and Ambow Education
Given the investment horizon of 90 days Merit Medical Systems is expected to under-perform the Ambow Education. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 2.56 times less risky than Ambow Education. The stock trades about -0.06 of its potential returns per unit of risk. The Ambow Education Holding is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 173.00 in Ambow Education Holding on January 29, 2024 and sell it today you would earn a total of 1.00 from holding Ambow Education Holding or generate 0.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Merit Medical Systems vs. Ambow Education Holding
Performance |
Timeline |
Merit Medical Systems |
Ambow Education Holding |
Merit Medical and Ambow Education Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Merit Medical and Ambow Education
The main advantage of trading using opposite Merit Medical and Ambow Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Ambow Education 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 Ambow Education will offset losses from the drop in Ambow Education's long position.Merit Medical vs. Teleflex Incorporated | Merit Medical vs. The Cooper Companies | Merit Medical vs. West Pharmaceutical Services | Merit Medical vs. ICU Medical |
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Check out your portfolio center.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.
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