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
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Meridian is 0.88. 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 is expected to generate 2.99 times less return on investment than Meridian Contrarian. But when comparing it to its historical volatility, Vanguard 500 Index is 1.3 times less risky than Meridian Contrarian. It trades about 0.15 of its potential returns per unit of risk. Meridian Trarian Fund is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 3,739 in Meridian Trarian Fund on August 29, 2024 and sell it today you would earn a total of 341.00 from holding Meridian Trarian Fund or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | 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 Stock | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Windsor Ii | Vanguard 500 vs. Vanguard Small Cap Index |
| Meridian Contrarian vs. Mfs Mid Cap | Meridian Contrarian vs. Mfs Research International | Meridian Contrarian vs. Mfs New Discovery | Meridian Contrarian vs. Mfs Value 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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