Correlation Between Merit Medical and Microbot Medical

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

Diversification Opportunities for Merit Medical and Microbot Medical

0.64

Correlation Coefficient

Merit Medical  Microbot Medical

Poor diversification

The 3 months correlation between Merit and Microbot is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Microbot Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microbot Medical 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 Microbot Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microbot Medical has no effect on the direction of Merit Medical i.e., Merit Medical and Microbot Medical go up and down completely randomly.

Pair Corralation between Merit Medical and Microbot Medical

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.37 times more return on investment than Microbot Medical. However, Merit Medical Systems is 2.71 times less risky than Microbot Medical. It trades about 0.05 of its potential returns per unit of risk. Microbot Medical is currently generating about -0.24 per unit of risk. If you would invest  7,291  in Merit Medical Systems on January 26, 2024 and sell it today you would earn a total of  112.00  from holding Merit Medical Systems or generate 1.54% return on investment over 90 days.

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

Merit Medical Systems  vs.  Microbot Medical

Merit Medical Systems

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Merit Medical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Microbot Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microbot Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Merit Medical and Microbot Medical

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

The idea behind Merit Medical Systems and Microbot Medical 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..