Correlation Between Meridian Equity and Meridian Small
Can any of the company-specific risk be diversified away by investing in both Meridian Equity and Meridian Small 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 Small 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 Small Cap, you can compare the effects of market volatilities on Meridian Equity and Meridian Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meridian Equity and Meridian Small.
Diversification Opportunities for Meridian Equity and Meridian Small
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 Equity Income and Meridian Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Small Cap has no effect on the direction of Meridian Equity i.e., Meridian Equity and Meridian Small go up and down completely randomly.
Pair Corralation between Meridian Equity and Meridian Small
Assuming the 90 days horizon Meridian Equity is expected to generate 5.3 times less return on investment than Meridian Small. But when comparing it to its historical volatility, Meridian Equity Income is 2.47 times less risky than Meridian Small. It trades about 0.12 of its potential returns per unit of risk. Meridian Small Cap is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,253 in Meridian Small Cap on August 29, 2024 and sell it today you would earn a total of 90.00 from holding Meridian Small Cap or generate 7.18% 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 Small Cap
Performance |
| Timeline |
| Meridian Equity Income |
| Meridian Small Cap |
Meridian Equity and Meridian Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meridian Equity and Meridian Small
The main advantage of trading using opposite Meridian Equity and Meridian Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meridian Equity position performs unexpectedly, Meridian Small 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 Small will offset losses from the drop in Meridian Small's long position.| Meridian Equity vs. Ab Impact Municipal | Meridian Equity vs. Artisan High Income | Meridian Equity vs. Blrc Sgy Mnp | Meridian Equity vs. Oklahoma Municipal Fund |
| Meridian Small vs. Putnam Equity Income | Meridian Small vs. Putnam Growth Opportunities | Meridian Small vs. HUMANA INC | Meridian Small vs. Aquagold International |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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