Correlation Between IDEXX Laboratories and Merit Medical

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

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

Diversification Opportunities for IDEXX Laboratories and Merit Medical

-0.47

Correlation Coefficient

IDEXX Laboratories  Merit Medical

Very good diversification

The 3 months correlation between IDEXX and Merit is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding IDEXX Laboratories 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 IDEXX Laboratories 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 IDEXX Laboratories 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 IDEXX Laboratories i.e., IDEXX Laboratories and Merit Medical go up and down completely randomly.

Pair Corralation between IDEXX Laboratories and Merit Medical

Given the investment horizon of 90 days IDEXX Laboratories is expected to under-perform the Merit Medical. In addition to that, IDEXX Laboratories is 1.69 times more volatile than Merit Medical Systems. It trades about -0.16 of its total potential returns per unit of risk. Merit Medical Systems is currently generating about 0.31 per unit of volatility. If you would invest  9,535  in Merit Medical Systems on August 24, 2024 and sell it today you would earn a total of  968.00  from holding Merit Medical Systems or generate 10.15% return on investment over 90 days.

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

IDEXX Laboratories  vs.  Merit Medical Systems

IDEXX Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDEXX Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Merit Medical Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Merit Medical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IDEXX Laboratories and Merit Medical

The main advantage of trading using opposite IDEXX Laboratories and Merit Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEXX Laboratories 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 IDEXX Laboratories 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.