Correlation Between HCM Defender and 6 Meridian

Can any of the company-specific risk be diversified away by investing in both HCM Defender 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 HCM Defender and 6 Meridian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HCM Defender 100 and 6 Meridian Quality, you can compare the effects of market volatilities on HCM Defender 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 HCM Defender with a short position of 6 Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCM Defender and 6 Meridian.

Diversification Opportunities for HCM Defender and 6 Meridian

0.65

Correlation Coefficient

HCM Defender  6 Meridian

Poor diversification

The 3 months correlation between HCM and SXQG is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding HCM Defender 100 and 6 Meridian Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 6 Meridian Quality and HCM Defender 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 HCM Defender 100 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 Quality has no effect on the direction of HCM Defender i.e., HCM Defender and 6 Meridian go up and down completely randomly.

Pair Corralation between HCM Defender and 6 Meridian

Considering the 90-day investment horizon HCM Defender 100 is expected to under-perform the 6 Meridian. In addition to that, HCM Defender is 1.49 times more volatile than 6 Meridian Quality. It trades about -0.16 of its total potential returns per unit of risk. 6 Meridian Quality is currently generating about -0.11 per unit of volatility. If you would invest  3,246  in 6 Meridian Quality on December 26, 2024 and sell it today you would lose (216.00) from holding 6 Meridian Quality or give up 6.65% of portfolio value over 90 days.

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

HCM Defender 100  vs.  6 Meridian Quality

HCM Defender 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCM Defender 100 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

6 Meridian Quality

Risk-Adjusted Performance

Very Weak

Over the last 90 days 6 Meridian Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with HCM Defender and 6 Meridian

The main advantage of trading using opposite HCM Defender and 6 Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCM Defender 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 HCM Defender 100 and 6 Meridian Quality 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.