Correlation Between Merit Medical and R1 RCM

Can any of the company-specific risk be diversified away by investing in both Merit Medical and R1 RCM 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 R1 RCM 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 R1 RCM Inc, you can compare the effects of market volatilities on Merit Medical and R1 RCM 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 R1 RCM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merit Medical and R1 RCM.

Diversification Opportunities for Merit Medical and R1 RCM

-0.49

Correlation Coefficient

Merit Medical  R1 RCM

Very good diversification

The 3 months correlation between Merit and RCM is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and R1 RCM Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on R1 RCM Inc 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 R1 RCM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of R1 RCM Inc has no effect on the direction of Merit Medical i.e., Merit Medical and R1 RCM go up and down completely randomly.

Pair Corralation between Merit Medical and R1 RCM

Given the investment horizon of 90 days Merit Medical Systems is expected to generate 1.02 times more return on investment than R1 RCM. However, Merit Medical is 1.02 times more volatile than R1 RCM Inc. It trades about 0.2 of its potential returns per unit of risk. R1 RCM Inc is currently generating about -0.06 per unit of risk. If you would invest  7,229  in Merit Medical Systems on February 2, 2024 and sell it today you would earn a total of  434.00  from holding Merit Medical Systems or generate 6.0% return on investment over 90 days.

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

Merit Medical Systems  vs.  R1 RCM Inc

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

R1 RCM Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in R1 RCM Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, R1 RCM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merit Medical and R1 RCM

The main advantage of trading using opposite Merit Medical and R1 RCM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merit Medical position performs unexpectedly, R1 RCM 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 R1 RCM will offset losses from the drop in R1 RCM's long position.

The idea behind Merit Medical Systems and R1 RCM Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.