Correlation Between American Funds and Meridian Equity
Can any of the company-specific risk be diversified away by investing in both American Funds and Meridian Equity 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 American Funds and Meridian Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Meridian Equity Income, you can compare the effects of market volatilities on American Funds and Meridian Equity 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 American Funds with a short position of Meridian Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Meridian Equity.
Diversification Opportunities for American Funds and Meridian Equity
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Meridian is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Meridian Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Equity Income and American Funds 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 American Funds Fundamental are associated (or correlated) with Meridian Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Equity Income has no effect on the direction of American Funds i.e., American Funds and Meridian Equity go up and down completely randomly.
Pair Corralation between American Funds and Meridian Equity
Assuming the 90 days horizon American Funds Fundamental is expected to generate 1.23 times more return on investment than Meridian Equity. However, American Funds is 1.23 times more volatile than Meridian Equity Income. It trades about 0.19 of its potential returns per unit of risk. Meridian Equity Income is currently generating about 0.09 per unit of risk. If you would invest 8,194 in American Funds Fundamental on October 23, 2024 and sell it today you would earn a total of 259.00 from holding American Funds Fundamental or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
American Funds Fundamental vs. Meridian Equity Income
Performance |
| Timeline |
| American Funds Funda |
| Meridian Equity Income |
American Funds and Meridian Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Meridian Equity
The main advantage of trading using opposite American Funds and Meridian Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Meridian Equity 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 Meridian Equity will offset losses from the drop in Meridian Equity's long position.| American Funds vs. Small Pany Growth | American Funds vs. Needham Small Cap | American Funds vs. Praxis Small Cap | American Funds vs. Franklin Small Cap |
| Meridian Equity vs. Tiaa Cref Inflation Link | Meridian Equity vs. Great West Inflation Protected Securities | Meridian Equity vs. Arrow Managed Futures | Meridian Equity vs. Simt Multi Asset Inflation |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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