Correlation Between Meridian Growth and Ariel International

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

By analyzing existing cross correlation between Meridian Growth Fund and Ariel International Fund, you can compare the effects of market volatilities on Meridian Growth and Ariel International 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 Growth with a short position of Ariel International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meridian Growth and Ariel International.

Diversification Opportunities for Meridian Growth and Ariel International

-0.57

Correlation Coefficient

Meridian Growth  Ariel International

Excellent diversification

The 3 months correlation between Meridian and Ariel is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Growth Fund and Ariel International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel International and Meridian Growth 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 Growth Fund are associated (or correlated) with Ariel International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel International has no effect on the direction of Meridian Growth i.e., Meridian Growth and Ariel International go up and down completely randomly.

Pair Corralation between Meridian Growth and Ariel International

Assuming the 90 days horizon Meridian Growth Fund is expected to under-perform the Ariel International. In addition to that, Meridian Growth is 1.18 times more volatile than Ariel International Fund. It trades about -0.11 of its total potential returns per unit of risk. Ariel International Fund is currently generating about 0.21 per unit of volatility. If you would invest  1,413  in Ariel International Fund on December 29, 2024 and sell it today you would earn a total of  178.00  from holding Ariel International Fund or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Meridian Growth Fund  vs.  Ariel International Fund

Meridian Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meridian Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Ariel International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel International Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Meridian Growth and Ariel International

The main advantage of trading using opposite Meridian Growth and Ariel International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meridian Growth position performs unexpectedly, Ariel International 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 Ariel International will offset losses from the drop in Ariel International's long position.

The idea behind Meridian Growth Fund and Ariel International 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.