Correlation Between Merit Medical and Village Super

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

Diversification Opportunities for Merit Medical and Village Super

0.56

Correlation Coefficient

Merit Medical  Village Super

Very weak diversification

The 3 months correlation between Merit and Village is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Merit Medical Systems and Village Super Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Super Market 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 Village Super. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Super Market has no effect on the direction of Merit Medical i.e., Merit Medical and Village Super go up and down completely randomly.

Pair Corralation between Merit Medical and Village Super

Given the investment horizon of 90 days Merit Medical Systems is expected to under-perform the Village Super. But the stock apears to be less risky and, when comparing its historical volatility, Merit Medical Systems is 1.67 times less risky than Village Super. The stock trades about -0.13 of its potential returns per unit of risk. The Village Super Market is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,026  in Village Super Market on October 10, 2024 and sell it today you would earn a total of  225.00  from holding Village Super Market or generate 7.44% return on investment over 90 days.

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

Merit Medical Systems  vs.  Village Super Market

Merit Medical Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merit Medical Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Village Super Market

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Village Super Market are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Village Super may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Merit Medical and Village Super

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

The idea behind Merit Medical Systems and Village Super Market 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.