Correlation Between Vanguard 500 and Meridian Contrarian
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 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 500 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 500 Index and Meridian Trarian Fund, you can compare the effects of market volatilities on Vanguard 500 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 500 with a short position of Meridian Contrarian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Meridian Contrarian.
Diversification Opportunities for Vanguard 500 and Meridian Contrarian
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Meridian is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index 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 500 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 500 Index 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 500 i.e., Vanguard 500 and Meridian Contrarian go up and down completely randomly.
Pair Corralation between Vanguard 500 and Meridian Contrarian
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 0.75 times more return on investment than Meridian Contrarian. However, Vanguard 500 Index is 1.33 times less risky than Meridian Contrarian. It trades about 0.11 of its potential returns per unit of risk. Meridian Trarian Fund is currently generating about 0.02 per unit of risk. If you would invest 19,025 in Vanguard 500 Index on August 26, 2024 and sell it today you would earn a total of 10,231 from holding Vanguard 500 Index or generate 53.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Meridian Trarian Fund
Performance |
| Timeline |
| Vanguard 500 Index |
| Meridian Contrarian |
Vanguard 500 and Meridian Contrarian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Meridian Contrarian
The main advantage of trading using opposite Vanguard 500 and Meridian Contrarian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 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.| Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Mid Cap Index | Vanguard 500 vs. Vanguard Extended Market |
| Meridian Contrarian vs. Meridian Growth Fund | Meridian Contrarian vs. Clipper Fund Inc | Meridian Contrarian vs. Mairs Power Growth | Meridian Contrarian vs. Thompson Largecap Fund |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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