Correlation Between GM and Meridian Small

Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Meridian Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Meridian Small Cap, you can compare the effects of market volatilities on GM 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 GM with a short position of Meridian Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Meridian Small.

Diversification Opportunities for GM and Meridian Small

0.43

Correlation Coefficient

GM  Meridian Small

Very weak diversification

The 3 months correlation between GM and Meridian is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Meridian Small go up and down completely randomly.

Pair Corralation between GM and Meridian Small

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Meridian Small. In addition to that, GM is 2.32 times more volatile than Meridian Small Cap. It trades about -0.11 of its total potential returns per unit of risk. Meridian Small Cap is currently generating about -0.21 per unit of volatility. If you would invest  1,219  in Meridian Small Cap on December 4, 2024 and sell it today you would lose (145.00) from holding Meridian Small Cap or give up 11.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Meridian Small Cap

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Meridian Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meridian Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with GM and Meridian Small

The main advantage of trading using opposite GM and Meridian Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.

The idea behind General Motors and Meridian Small Cap 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.