Correlation Between Meridian Growth and Mairs Power

Can any of the company-specific risk be diversified away by investing in both Meridian Growth and Mairs Power 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 Mairs Power 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 Mairs Power Balanced, you can compare the effects of market volatilities on Meridian Growth and Mairs Power 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 Mairs Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meridian Growth and Mairs Power.

Diversification Opportunities for Meridian Growth and Mairs Power

0.75

Correlation Coefficient

Meridian Growth  Mairs Power

Poor diversification

The 3 months correlation between Meridian and Mairs is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Growth Fund and Mairs Power Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mairs Power Balanced 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 Mairs Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mairs Power Balanced has no effect on the direction of Meridian Growth i.e., Meridian Growth and Mairs Power go up and down completely randomly.

Pair Corralation between Meridian Growth and Mairs Power

Assuming the 90 days horizon Meridian Growth Fund is expected to under-perform the Mairs Power. In addition to that, Meridian Growth is 1.99 times more volatile than Mairs Power Balanced. It trades about -0.11 of its total potential returns per unit of risk. Mairs Power Balanced is currently generating about -0.03 per unit of volatility. If you would invest  10,931  in Mairs Power Balanced on December 29, 2024 and sell it today you would lose (124.00) from holding Mairs Power Balanced or give up 1.13% of portfolio value over 90 days.

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

Meridian Growth Fund  vs.  Mairs Power Balanced

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.

Mairs Power Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mairs Power Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Mairs Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Meridian Growth and Mairs Power

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

The idea behind Meridian Growth Fund and Mairs Power Balanced 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.