Correlation Between Overlay Shares and 6 Meridian

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Overlay Shares and 6 Meridian 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 Overlay Shares and 6 Meridian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Overlay Shares Large and 6 Meridian Small, you can compare the effects of market volatilities on Overlay Shares and 6 Meridian 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 Overlay Shares with a short position of 6 Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overlay Shares and 6 Meridian.

Diversification Opportunities for Overlay Shares and 6 Meridian

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Overlay and SIXS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Overlay Shares Large and 6 Meridian Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 6 Meridian Small and Overlay Shares 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 Overlay Shares Large are associated (or correlated) with 6 Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 6 Meridian Small has no effect on the direction of Overlay Shares i.e., Overlay Shares and 6 Meridian go up and down completely randomly.

Pair Corralation between Overlay Shares and 6 Meridian

Considering the 90-day investment horizon Overlay Shares Large is expected to generate 1.12 times more return on investment than 6 Meridian. However, Overlay Shares is 1.12 times more volatile than 6 Meridian Small. It trades about -0.03 of its potential returns per unit of risk. 6 Meridian Small is currently generating about -0.17 per unit of risk. If you would invest  4,825  in Overlay Shares Large on December 1, 2024 and sell it today you would lose (94.00) from holding Overlay Shares Large or give up 1.95% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Overlay Shares Large  vs.  6 Meridian Small

 Performance 
       Timeline  
Overlay Shares Large 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Overlay Shares Large has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Overlay Shares is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
6 Meridian Small 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days 6 Meridian Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Overlay Shares and 6 Meridian Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Overlay Shares and 6 Meridian

The main advantage of trading using opposite Overlay Shares and 6 Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Overlay Shares position performs unexpectedly, 6 Meridian 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 6 Meridian will offset losses from the drop in 6 Meridian's long position.
The idea behind Overlay Shares Large and 6 Meridian Small 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.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

Other Complementary Tools

Portfolio Dashboard
Portfolio dashboard that provides centralized access to all your investments
Piotroski F Score
Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals
Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments