Correlation Between VULCAN MATERIALS and Merit Medical

Can any of the company-specific risk be diversified away by investing in both VULCAN MATERIALS and Merit 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 VULCAN MATERIALS and Merit Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VULCAN MATERIALS and Merit Medical Systems, you can compare the effects of market volatilities on VULCAN MATERIALS and Merit 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 VULCAN MATERIALS with a short position of Merit Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of VULCAN MATERIALS and Merit Medical.

Diversification Opportunities for VULCAN MATERIALS and Merit Medical

0.66

Correlation Coefficient

VULCAN MATERIALS  Merit Medical

Poor diversification

The 3 months correlation between VULCAN and Merit is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Merit Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merit Medical Systems and VULCAN MATERIALS 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 VULCAN MATERIALS are associated (or correlated) with Merit Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merit Medical Systems has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Merit Medical go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Merit Medical

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to under-perform the Merit Medical. In addition to that, VULCAN MATERIALS is 1.09 times more volatile than Merit Medical Systems. It trades about -0.14 of its total potential returns per unit of risk. Merit Medical Systems is currently generating about -0.02 per unit of volatility. If you would invest  9,250  in Merit Medical Systems on December 21, 2024 and sell it today you would lose (200.00) from holding Merit Medical Systems or give up 2.16% of portfolio value over 90 days.

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

VULCAN MATERIALS  vs.  Merit Medical Systems

VULCAN MATERIALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days VULCAN MATERIALS 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. In spite of comparatively stable basic indicators, Merit Medical is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VULCAN MATERIALS and Merit Medical

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

The idea behind VULCAN MATERIALS and Merit Medical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.