Correlation Between Meridian Equity and Origin Emerging

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

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

Diversification Opportunities for Meridian Equity and Origin Emerging

0.43

Correlation Coefficient

Meridian Equity  Origin Emerging

Very weak diversification

The 3 months correlation between MERIDIAN and Origin is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Equity Income and Origin Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Emerging Markets and Meridian Equity 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 Meridian Equity Income are associated (or correlated) with Origin Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Emerging Markets has no effect on the direction of Meridian Equity i.e., Meridian Equity and Origin Emerging go up and down completely randomly.

Pair Corralation between Meridian Equity and Origin Emerging

Assuming the 90 days horizon Meridian Equity Income is expected to generate 0.45 times more return on investment than Origin Emerging. However, Meridian Equity Income is 2.2 times less risky than Origin Emerging. It trades about 0.2 of its potential returns per unit of risk. Origin Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest  1,344  in Meridian Equity Income on September 3, 2024 and sell it today you would earn a total of  81.00  from holding Meridian Equity Income or generate 6.03% return on investment over 90 days.

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

Meridian Equity Income  vs.  Origin Emerging Markets

Meridian Equity Income

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meridian Equity Income are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Meridian Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Origin Emerging Markets

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Emerging Markets are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Origin Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Meridian Equity and Origin Emerging

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

The idea behind Meridian Equity Income and Origin Emerging Markets 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.