Correlation Between Merit Medical and Gatekeeper Systems

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

Diversification Opportunities for Merit Medical and Gatekeeper Systems

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Merit and Gatekeeper is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Gatekeeper Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatekeeper Systems 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 Gatekeeper Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatekeeper Systems has no effect on the direction of Merit Medical i.e., Merit Medical and Gatekeeper Systems go up and down completely randomly.

Pair Corralation between Merit Medical and Gatekeeper Systems

Given the investment horizon of 90 days Merit Medical Systems is expected to under-perform the Gatekeeper Systems. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 3.8 times less risky than Gatekeeper Systems. The stock trades about -0.08 of its potential returns per unit of risk. The Gatekeeper Systems is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Gatekeeper Systems on May 4, 2025 and sell it today you would earn a total of  64.00  from holding Gatekeeper Systems or generate 206.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Merit Medical Systems  vs.  Gatekeeper Systems

 Performance 
       Timeline  
Merit Medical Systems 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Merit Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.
Gatekeeper Systems 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Gatekeeper Systems are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Gatekeeper Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Merit Medical and Gatekeeper Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merit Medical and Gatekeeper Systems

The main advantage of trading using opposite Merit Medical and Gatekeeper Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, Gatekeeper Systems 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 Gatekeeper Systems will offset losses from the drop in Gatekeeper Systems' long position.
The idea behind Merit Medical Systems and Gatekeeper 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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