Correlation Between Meridian Growth and Vanguard Financials
Can any of the company-specific risk be diversified away by investing in both Meridian Growth and Vanguard Financials 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 Vanguard Financials 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 Vanguard Financials Index, you can compare the effects of market volatilities on Meridian Growth and Vanguard Financials 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 Vanguard Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meridian Growth and Vanguard Financials.
Diversification Opportunities for Meridian Growth and Vanguard Financials
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meridian and Vanguard is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Growth Fund and Vanguard Financials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Financials Index 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 Vanguard Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Financials Index has no effect on the direction of Meridian Growth i.e., Meridian Growth and Vanguard Financials go up and down completely randomly.
Pair Corralation between Meridian Growth and Vanguard Financials
Assuming the 90 days horizon Meridian Growth Fund is expected to under-perform the Vanguard Financials. But the mutual fund apears to be less risky and, when comparing its historical volatility, Meridian Growth Fund is 1.0 times less risky than Vanguard Financials. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Vanguard Financials Index is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6,191 in Vanguard Financials Index on December 3, 2024 and sell it today you would earn a total of 69.00 from holding Vanguard Financials Index or generate 1.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Meridian Growth Fund vs. Vanguard Financials Index
Performance |
Timeline |
Meridian Growth |
Vanguard Financials Index |
Meridian Growth and Vanguard Financials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Meridian Growth and Vanguard Financials
The main advantage of trading using opposite Meridian Growth and Vanguard Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meridian Growth position performs unexpectedly, Vanguard Financials 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 Vanguard Financials will offset losses from the drop in Vanguard Financials' long position.Meridian Growth vs. John Hancock Variable | Meridian Growth vs. Baillie Gifford Health | Meridian Growth vs. Health Care Ultrasector | Meridian Growth vs. Alphacentric Lifesci Healthcare |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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