Correlation Between ETC 6 and 6 Meridian

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

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

Diversification Opportunities for ETC 6 and 6 Meridian

0.42

Correlation Coefficient

ETC 6  6 Meridian

Very weak diversification

The 3 months correlation between ETC and SXQG is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding ETC 6 Meridian 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 ETC 6 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 ETC 6 Meridian 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 ETC 6 i.e., ETC 6 and 6 Meridian go up and down completely randomly.

Pair Corralation between ETC 6 and 6 Meridian

Given the investment horizon of 90 days ETC 6 Meridian is expected to under-perform the 6 Meridian. But the etf apears to be less risky and, when comparing its historical volatility, ETC 6 Meridian is 2.09 times less risky than 6 Meridian. The etf trades about -0.05 of its potential returns per unit of risk. The 6 Meridian Quality is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,103  in 6 Meridian Quality on September 27, 2024 and sell it today you would earn a total of  137.00  from holding 6 Meridian Quality or generate 4.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

ETC 6 Meridian  vs.  6 Meridian Quality

ETC 6 Meridian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ETC 6 Meridian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ETC 6 is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

6 Meridian Quality

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 6 Meridian Quality are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, 6 Meridian may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ETC 6 and 6 Meridian

The main advantage of trading using opposite ETC 6 and 6 Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETC 6 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 ETC 6 Meridian 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.