Correlation Between Meridian Growth and Royce Pennsylvania

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

Diversification Opportunities for Meridian Growth and Royce Pennsylvania

0.75

Correlation Coefficient

Meridian Growth  Royce Pennsylvania

Poor diversification

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

Pair Corralation between Meridian Growth and Royce Pennsylvania

Assuming the 90 days horizon Meridian Growth Fund is expected to generate 0.68 times more return on investment than Royce Pennsylvania. However, Meridian Growth Fund is 1.47 times less risky than Royce Pennsylvania. It trades about -0.16 of its potential returns per unit of risk. Royce Pennsylvania Mutual is currently generating about -0.21 per unit of risk. If you would invest  3,872  in Meridian Growth Fund on December 3, 2024 and sell it today you would lose (360.00) from holding Meridian Growth Fund or give up 9.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Meridian Growth Fund  vs.  Royce Pennsylvania Mutual

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.

Royce Pennsylvania Mutual

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Pennsylvania Mutual 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 basic 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 Meridian Growth and Royce Pennsylvania

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

The idea behind Meridian Growth Fund and Royce Pennsylvania Mutual 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..