Correlation Between 6 Meridian and ETC 6

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

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

Diversification Opportunities for 6 Meridian and ETC 6

0.42

Correlation Coefficient

6 Meridian  ETC 6

Very weak diversification

The 3 months correlation between SXQG and ETC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding 6 Meridian Quality and ETC 6 Meridian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETC 6 Meridian and 6 Meridian 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 6 Meridian Quality are associated (or correlated) with ETC 6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETC 6 Meridian has no effect on the direction of 6 Meridian i.e., 6 Meridian and ETC 6 go up and down completely randomly.

Pair Corralation between 6 Meridian and ETC 6

Given the investment horizon of 90 days 6 Meridian Quality is expected to generate 2.09 times more return on investment than ETC 6. However, 6 Meridian is 2.09 times more volatile than ETC 6 Meridian. It trades about 0.11 of its potential returns per unit of risk. ETC 6 Meridian is currently generating about -0.05 per unit of risk. 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

6 Meridian Quality  vs.  ETC 6 Meridian

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.

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.

Pair Trading with 6 Meridian and ETC 6

The main advantage of trading using opposite 6 Meridian and ETC 6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 6 Meridian position performs unexpectedly, ETC 6 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 ETC 6 will offset losses from the drop in ETC 6's long position.

The idea behind 6 Meridian Quality and ETC 6 Meridian 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.