Correlation Between Vanguard Extended and Meridian Contrarian

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Meridian Contrarian 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 Vanguard Extended and Meridian Contrarian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Market and Meridian Trarian Fund, you can compare the effects of market volatilities on Vanguard Extended and Meridian Contrarian 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 Vanguard Extended with a short position of Meridian Contrarian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Meridian Contrarian.

Diversification Opportunities for Vanguard Extended and Meridian Contrarian

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Vanguard and Meridian is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Meridian Trarian Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Contrarian and Vanguard Extended 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 Vanguard Extended Market are associated (or correlated) with Meridian Contrarian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Contrarian has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Meridian Contrarian go up and down completely randomly.

Pair Corralation between Vanguard Extended and Meridian Contrarian

Assuming the 90 days horizon Vanguard Extended Market is expected to generate 1.3 times more return on investment than Meridian Contrarian. However, Vanguard Extended is 1.3 times more volatile than Meridian Trarian Fund. It trades about 0.4 of its potential returns per unit of risk. Meridian Trarian Fund is currently generating about 0.47 per unit of risk. If you would invest  34,270  in Vanguard Extended Market on September 1, 2024 and sell it today you would earn a total of  4,097  from holding Vanguard Extended Market or generate 11.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard Extended Market  vs.  Meridian Trarian Fund

 Performance 
       Timeline  
Vanguard Extended Market 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Market are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Extended showed solid returns over the last few months and may actually be approaching a breakup point.
Meridian Contrarian 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Meridian Trarian Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Meridian Contrarian showed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Extended and Meridian Contrarian Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Extended and Meridian Contrarian

The main advantage of trading using opposite Vanguard Extended and Meridian Contrarian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Meridian Contrarian 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 Contrarian will offset losses from the drop in Meridian Contrarian's long position.
The idea behind Vanguard Extended Market and Meridian Trarian Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

Other Complementary Tools

Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Commodity Channel
Use Commodity Channel Index to analyze current equity momentum
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments