Correlation Between Royce Special and Meridian Contrarian

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

By analyzing existing cross correlation between Royce Special Equity and Meridian Trarian Fund, you can compare the effects of market volatilities on Royce Special and Meridian Contrarian 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 Royce Special with a short position of Meridian Contrarian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Special and Meridian Contrarian.

Diversification Opportunities for Royce Special and Meridian Contrarian

0.63

Correlation Coefficient

Royce Special  Meridian Contrarian

Poor diversification

The 3 months correlation between Royce and Meridian is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Royce Special Equity and Meridian Trarian Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Contrarian and Royce Special 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 Royce Special Equity are associated (or correlated) with Meridian Contrarian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Contrarian has no effect on the direction of Royce Special i.e., Royce Special and Meridian Contrarian go up and down completely randomly.

Pair Corralation between Royce Special and Meridian Contrarian

Assuming the 90 days horizon Royce Special Equity is expected to under-perform the Meridian Contrarian. In addition to that, Royce Special is 1.07 times more volatile than Meridian Trarian Fund. It trades about -0.01 of its total potential returns per unit of risk. Meridian Trarian Fund is currently generating about 0.03 per unit of volatility. If you would invest  3,384  in Meridian Trarian Fund on December 2, 2024 and sell it today you would earn a total of  401.00  from holding Meridian Trarian Fund or generate 11.85% return on investment over 90 days.

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

Royce Special Equity  vs.  Meridian Trarian Fund

Royce Special Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Special Equity 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 technical and fundamental 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.

Meridian Contrarian

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meridian Trarian Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Royce Special and Meridian Contrarian

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

The idea behind Royce Special Equity and Meridian Trarian Fund 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.