Correlation Between Meridian Growth and Blackrock Midcap

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

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

Diversification Opportunities for Meridian Growth and Blackrock Midcap

0.84

Correlation Coefficient

Meridian Growth  Blackrock Midcap

Very poor diversification

The 3 months correlation between Meridian and Blackrock is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Growth Fund and Blackrock Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Midcap Index and Meridian 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 Meridian Growth Fund are associated (or correlated) with Blackrock Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Midcap Index has no effect on the direction of Meridian Growth i.e., Meridian Growth and Blackrock Midcap go up and down completely randomly.

Pair Corralation between Meridian Growth and Blackrock Midcap

Assuming the 90 days horizon Meridian Growth is expected to generate 1.02 times less return on investment than Blackrock Midcap. In addition to that, Meridian Growth is 1.37 times more volatile than Blackrock Midcap Index. It trades about 0.25 of its total potential returns per unit of risk. Blackrock Midcap Index is currently generating about 0.35 per unit of volatility. If you would invest  1,555  in Blackrock Midcap Index on August 29, 2024 and sell it today you would earn a total of  111.00  from holding Blackrock Midcap Index or generate 7.14% return on investment over 90 days.

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

Meridian Growth Fund  vs.  Blackrock Midcap Index

Meridian Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meridian Growth Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Meridian Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Midcap Index

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Midcap Index are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Midcap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Meridian Growth and Blackrock Midcap

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

The idea behind Meridian Growth Fund and Blackrock Midcap Index 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.