Correlation Between Meridian Equity and Meridian Growth
Can any of the company-specific risk be diversified away by investing in both Meridian Equity 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 Meridian Equity and Meridian Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meridian Equity Income and Meridian Growth Fund, you can compare the effects of market volatilities on Meridian Equity 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 Meridian Equity with a short position of Meridian Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meridian Equity and Meridian Growth.
Diversification Opportunities for Meridian Equity and Meridian Growth
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meridian and Meridian is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Equity Income and Meridian Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Growth and Meridian Equity 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 Equity Income 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 Meridian Equity i.e., Meridian Equity and Meridian Growth go up and down completely randomly.
Pair Corralation between Meridian Equity and Meridian Growth
Assuming the 90 days horizon Meridian Equity is expected to generate 4.79 times less return on investment than Meridian Growth. But when comparing it to its historical volatility, Meridian Equity Income is 2.76 times less risky than Meridian Growth. It trades about 0.15 of its potential returns per unit of risk. Meridian Growth Fund is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,123 in Meridian Growth Fund on August 26, 2024 and sell it today you would earn a total of 222.00 from holding Meridian Growth Fund or generate 7.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meridian Equity Income vs. Meridian Growth Fund
Performance |
| Timeline |
| Meridian Equity Income |
| Meridian Growth |
Meridian Equity and Meridian Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meridian Equity and Meridian Growth
The main advantage of trading using opposite Meridian Equity and Meridian Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meridian Equity 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.| Meridian Equity vs. Ab Small Cap | Meridian Equity vs. Massmutual Select Small | Meridian Equity vs. Ab Small Cap | Meridian Equity vs. Vanguard Small Cap Index |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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