Correlation Between Merit Medical and Alphatec Holdings

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

Diversification Opportunities for Merit Medical and Alphatec Holdings

0.68

Correlation Coefficient

Merit Medical  Alphatec Holdings

Poor diversification

The 3 months correlation between Merit and Alphatec is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Alphatec Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphatec Holdings 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 Alphatec Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphatec Holdings has no effect on the direction of Merit Medical i.e., Merit Medical and Alphatec Holdings go up and down completely randomly.

Pair Corralation between Merit Medical and Alphatec Holdings

Given the investment horizon of 90 days Merit Medical Systems is expected to under-perform the Alphatec Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 1.37 times less risky than Alphatec Holdings. The stock trades about -0.08 of its potential returns per unit of risk. The Alphatec Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,140  in Alphatec Holdings on April 24, 2025 and sell it today you would lose (57.50) from holding Alphatec Holdings or give up 5.04% of portfolio value over 90 days.

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

Merit Medical Systems  vs.  Alphatec Holdings

Merit Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merit Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Alphatec Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphatec Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Alphatec Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Merit Medical and Alphatec Holdings

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

The idea behind Merit Medical Systems and Alphatec Holdings 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.