Correlation Between Meridian Growth and Meridian Equity
Can any of the company-specific risk be diversified away by investing in both Meridian Growth 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 Meridian Growth and Meridian Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meridian Growth Fund and Meridian Equity Income, you can compare the effects of market volatilities on Meridian Growth 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 Meridian Growth with a short position of Meridian Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meridian Growth and Meridian Equity.
Diversification Opportunities for Meridian Growth and Meridian Equity
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meridian and Meridian is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Growth Fund 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 Meridian Growth 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 Meridian Growth Fund 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 Meridian Growth i.e., Meridian Growth and Meridian Equity go up and down completely randomly.
Pair Corralation between Meridian Growth and Meridian Equity
Assuming the 90 days horizon Meridian Growth Fund is expected to generate 1.67 times more return on investment than Meridian Equity. However, Meridian Growth is 1.67 times more volatile than Meridian Equity Income. It trades about 0.09 of its potential returns per unit of risk. Meridian Equity Income is currently generating about 0.12 per unit of risk. If you would invest 3,228 in Meridian Growth Fund on September 1, 2024 and sell it today you would earn a total of 397.00 from holding Meridian Growth Fund or generate 12.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meridian Growth Fund vs. Meridian Equity Income
Performance |
| Timeline |
| Meridian Growth |
| Meridian Equity Income |
Meridian Growth and Meridian Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meridian Growth and Meridian Equity
The main advantage of trading using opposite Meridian Growth and Meridian Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meridian Growth 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.| Meridian Growth vs. Meridian Equity Income | Meridian Growth vs. Meridian Equity Income | Meridian Growth vs. Meridian Growth Fund | Meridian Growth vs. Meridian Equity Income |
| Meridian Equity vs. Legg Mason Partners | Meridian Equity vs. Fidelity Capital Income | Meridian Equity vs. Western Asset High | Meridian Equity vs. American Century High |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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