Correlation Between Meridian Growth and Towpath Focus
Can any of the company-specific risk be diversified away by investing in both Meridian Growth and Towpath Focus 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 Towpath Focus 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 Towpath Focus, you can compare the effects of market volatilities on Meridian Growth and Towpath Focus 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 Towpath Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meridian Growth and Towpath Focus.
Diversification Opportunities for Meridian Growth and Towpath Focus
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meridian and Towpath is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Growth Fund and Towpath Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towpath Focus 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 Towpath Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towpath Focus has no effect on the direction of Meridian Growth i.e., Meridian Growth and Towpath Focus go up and down completely randomly.
Pair Corralation between Meridian Growth and Towpath Focus
Assuming the 90 days horizon Meridian Growth is expected to generate 3.08 times less return on investment than Towpath Focus. In addition to that, Meridian Growth is 1.41 times more volatile than Towpath Focus. It trades about 0.06 of its total potential returns per unit of risk. Towpath Focus is currently generating about 0.27 per unit of volatility. If you would invest 1,576 in Towpath Focus on October 23, 2024 and sell it today you would earn a total of 42.00 from holding Towpath Focus or generate 2.66% 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. Towpath Focus
Performance |
| Timeline |
| Meridian Growth |
| Towpath Focus |
Meridian Growth and Towpath Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meridian Growth and Towpath Focus
The main advantage of trading using opposite Meridian Growth and Towpath Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meridian Growth position performs unexpectedly, Towpath Focus 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 Towpath Focus will offset losses from the drop in Towpath Focus' long position.| Meridian Growth vs. Meridian Growth Fund | Meridian Growth vs. Fidelity Small Cap | Meridian Growth vs. Virtus Kar Small Cap | Meridian Growth vs. The Hartford Midcap |
| Towpath Focus vs. Fisher Large Cap | Towpath Focus vs. Blackrock Large Cap | Towpath Focus vs. Fidelity Large Cap | Towpath Focus vs. Touchstone Large Cap |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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