Correlation Between Vanguard Growth and 6 Meridian

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

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

Diversification Opportunities for Vanguard Growth and 6 Meridian

0.7

Correlation Coefficient

Vanguard Growth  6 Meridian

Poor diversification

The 3 months correlation between Vanguard and SXQG is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index 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 Vanguard Growth 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 Vanguard Growth Index 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 Vanguard Growth i.e., Vanguard Growth and 6 Meridian go up and down completely randomly.

Pair Corralation between Vanguard Growth and 6 Meridian

Considering the 90-day investment horizon Vanguard Growth Index is expected to generate 1.33 times more return on investment than 6 Meridian. However, Vanguard Growth is 1.33 times more volatile than 6 Meridian Quality. It trades about 0.01 of its potential returns per unit of risk. 6 Meridian Quality is currently generating about -0.04 per unit of risk. If you would invest  40,520  in Vanguard Growth Index on November 27, 2024 and sell it today you would earn a total of  141.00  from holding Vanguard Growth Index or generate 0.35% return on investment over 90 days.

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

Vanguard Growth Index  vs.  6 Meridian Quality

Vanguard Growth Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Growth Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vanguard Growth is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 nearly stable basic indicators, 6 Meridian is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Growth and 6 Meridian

The main advantage of trading using opposite Vanguard Growth and 6 Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth 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 Vanguard Growth Index 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.