Correlation Between Merit Medical and Becton Dickinson

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

Diversification Opportunities for Merit Medical and Becton Dickinson

0.63

Correlation Coefficient

Merit Medical  Becton Dickinson

Poor diversification

The 3 months correlation between Merit and Becton is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Becton Dickinson and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson 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 Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson has no effect on the direction of Merit Medical i.e., Merit Medical and Becton Dickinson go up and down completely randomly.

Pair Corralation between Merit Medical and Becton Dickinson

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 0.87 times more return on investment than Becton Dickinson. However, Merit Medical Systems is 1.14 times less risky than Becton Dickinson. It trades about -0.06 of its potential returns per unit of risk. Becton Dickinson and is currently generating about -0.12 per unit of risk. If you would invest  10,938  in Merit Medical Systems on February 18, 2025 and sell it today you would lose (1,138) from holding Merit Medical Systems or give up 10.41% 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.  Becton Dickinson and

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 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.

Becton Dickinson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Becton Dickinson and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Merit Medical and Becton Dickinson

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

The idea behind Merit Medical Systems and Becton Dickinson and 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.