Correlation Between Merit Medical and Shelf Drilling

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

Diversification Opportunities for Merit Medical and Shelf Drilling

0.33

Correlation Coefficient

Merit Medical  Shelf Drilling

Weak diversification

The 3 months correlation between Merit and Shelf is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Shelf Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelf Drilling 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 Shelf Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelf Drilling has no effect on the direction of Merit Medical i.e., Merit Medical and Shelf Drilling go up and down completely randomly.

Pair Corralation between Merit Medical and Shelf Drilling

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.37 times more return on investment than Shelf Drilling. However, Merit Medical Systems is 2.71 times less risky than Shelf Drilling. It trades about 0.11 of its potential returns per unit of risk. Shelf Drilling is currently generating about -0.05 per unit of risk. If you would invest  7,125  in Merit Medical Systems on February 15, 2024 and sell it today you would earn a total of  1,115  from holding Merit Medical Systems or generate 15.65% return on investment over 90 days.

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

Merit Medical Systems  vs.  Shelf Drilling

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 newest stock price confusion, may contribute to short-horizon losses for the traders.

Shelf Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shelf Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Merit Medical and Shelf Drilling

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

The idea behind Merit Medical Systems and Shelf Drilling 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.