Correlation Between V2X and Mercury Systems

Can any of the company-specific risk be diversified away by investing in both V2X and Mercury Systems 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 V2X and Mercury Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between V2X Inc and Mercury Systems, you can compare the effects of market volatilities on V2X and Mercury Systems 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 V2X with a short position of Mercury Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of V2X and Mercury Systems.

Diversification Opportunities for V2X and Mercury Systems

-0.07

Correlation Coefficient

V2X  Mercury Systems

Good diversification

The 3 months correlation between V2X and Mercury is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding V2X Inc and Mercury Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Systems and V2X 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 V2X Inc are associated (or correlated) with Mercury Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Systems has no effect on the direction of V2X i.e., V2X and Mercury Systems go up and down completely randomly.

Pair Corralation between V2X and Mercury Systems

Considering the 90-day investment horizon V2X is expected to generate 1.32 times less return on investment than Mercury Systems. But when comparing it to its historical volatility, V2X Inc is 1.12 times less risky than Mercury Systems. It trades about 0.06 of its potential returns per unit of risk. Mercury Systems is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,185  in Mercury Systems on December 27, 2024 and sell it today you would earn a total of  470.00  from holding Mercury Systems or generate 11.23% return on investment over 90 days.

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

V2X Inc  vs.  Mercury Systems

V2X Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in V2X Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, V2X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mercury Systems

Risk-Adjusted Performance

Modest

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

Pair Trading with V2X and Mercury Systems

The main advantage of trading using opposite V2X and Mercury Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V2X position performs unexpectedly, Mercury Systems 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 Mercury Systems will offset losses from the drop in Mercury Systems' long position.

The idea behind V2X Inc and Mercury 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.