Correlation Between The National and Meridian Equity
Can any of the company-specific risk be diversified away by investing in both The National 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 The National and Meridian Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The National Tax Free and Meridian Equity Income, you can compare the effects of market volatilities on The National 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 The National with a short position of Meridian Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Meridian Equity.
Diversification Opportunities for The National and Meridian Equity
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between The and Meridian is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free 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 The National 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 The National Tax Free 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 The National i.e., The National and Meridian Equity go up and down completely randomly.
Pair Corralation between The National and Meridian Equity
Assuming the 90 days horizon The National is expected to generate 2.67 times less return on investment than Meridian Equity. But when comparing it to its historical volatility, The National Tax Free is 4.11 times less risky than Meridian Equity. It trades about 0.03 of its potential returns per unit of risk. Meridian Equity Income is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,147 in Meridian Equity Income on October 23, 2024 and sell it today you would earn a total of 62.00 from holding Meridian Equity Income or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The National Tax Free vs. Meridian Equity Income
Performance |
| Timeline |
| National Tax |
| Meridian Equity Income |
The National and Meridian Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The National and Meridian Equity
The main advantage of trading using opposite The National and Meridian Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National 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.| The National vs. The Missouri Tax Free | The National vs. The Bond Fund | The National vs. High Yield Municipal Fund | The National vs. Fidelity Intermediate Municipal |
| 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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