Correlation Between Mairs Power and Meridian Growth
Can any of the company-specific risk be diversified away by investing in both Mairs Power and Meridian Growth 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 Mairs Power and Meridian Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mairs Power Growth and Meridian Growth Fund, you can compare the effects of market volatilities on Mairs Power and Meridian Growth 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 Mairs Power with a short position of Meridian Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mairs Power and Meridian Growth.
Diversification Opportunities for Mairs Power and Meridian Growth
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mairs and Meridian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Mairs Power Growth and Meridian Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Growth and Mairs Power 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 Mairs Power Growth are associated (or correlated) with Meridian Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Growth has no effect on the direction of Mairs Power i.e., Mairs Power and Meridian Growth go up and down completely randomly.
Pair Corralation between Mairs Power and Meridian Growth
Assuming the 90 days horizon Mairs Power Growth is expected to generate 0.82 times more return on investment than Meridian Growth. However, Mairs Power Growth is 1.21 times less risky than Meridian Growth. It trades about 0.11 of its potential returns per unit of risk. Meridian Growth Fund is currently generating about 0.09 per unit of risk. If you would invest 16,235 in Mairs Power Growth on August 29, 2024 and sell it today you would earn a total of 2,012 from holding Mairs Power Growth or generate 12.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mairs Power Growth vs. Meridian Growth Fund
Performance |
| Timeline |
| Mairs Power Growth |
| Meridian Growth |
Mairs Power and Meridian Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mairs Power and Meridian Growth
The main advantage of trading using opposite Mairs Power and Meridian Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mairs Power position performs unexpectedly, Meridian Growth 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 Growth will offset losses from the drop in Meridian Growth's long position.| Mairs Power vs. Vanguard Total Stock | Mairs Power vs. Vanguard 500 Index | Mairs Power vs. Vanguard Total Stock | Mairs Power vs. Vanguard Total Stock |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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