Correlation Between Q2 Holdings and Meridianlink

Can any of the company-specific risk be diversified away by investing in both Q2 Holdings and Meridianlink 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 Q2 Holdings and Meridianlink into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Q2 Holdings and Meridianlink, you can compare the effects of market volatilities on Q2 Holdings and Meridianlink 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 Q2 Holdings with a short position of Meridianlink. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Holdings and Meridianlink.

Diversification Opportunities for Q2 Holdings and Meridianlink

0.48

Correlation Coefficient

Q2 Holdings  Meridianlink

Very weak diversification

The 3 months correlation between QTWO and Meridianlink is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Holdings and Meridianlink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridianlink and Q2 Holdings 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 Q2 Holdings are associated (or correlated) with Meridianlink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridianlink has no effect on the direction of Q2 Holdings i.e., Q2 Holdings and Meridianlink go up and down completely randomly.

Pair Corralation between Q2 Holdings and Meridianlink

Given the investment horizon of 90 days Q2 Holdings is expected to under-perform the Meridianlink. But the stock apears to be less risky and, when comparing its historical volatility, Q2 Holdings is 1.01 times less risky than Meridianlink. The stock trades about -0.11 of its potential returns per unit of risk. The Meridianlink is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,070  in Meridianlink on December 29, 2024 and sell it today you would lose (147.00) from holding Meridianlink or give up 7.1% of portfolio value over 90 days.

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

Q2 Holdings  vs.  Meridianlink

Q2 Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Q2 Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Meridianlink

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Q2 Holdings and Meridianlink

The main advantage of trading using opposite Q2 Holdings and Meridianlink positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Holdings position performs unexpectedly, Meridianlink 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 Meridianlink will offset losses from the drop in Meridianlink's long position.

The idea behind Q2 Holdings and Meridianlink 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 Transaction History module to view history of all your transactions and understand their impact on performance.