Correlation Between Sportsmans Warehouse and Meiko Electronics

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

By analyzing existing cross correlation between Sportsmans Warehouse Holdings and Meiko Electronics Co, you can compare the effects of market volatilities on Sportsmans Warehouse and Meiko Electronics 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 Sportsmans Warehouse with a short position of Meiko Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sportsmans Warehouse and Meiko Electronics.

Diversification Opportunities for Sportsmans Warehouse and Meiko Electronics

-0.51

Correlation Coefficient

Sportsmans Warehouse  Meiko Electronics

Excellent diversification

The 3 months correlation between Sportsmans and Meiko is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sportsmans Warehouse Holdings and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics and Sportsmans Warehouse 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 Sportsmans Warehouse Holdings are associated (or correlated) with Meiko Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meiko Electronics has no effect on the direction of Sportsmans Warehouse i.e., Sportsmans Warehouse and Meiko Electronics go up and down completely randomly.

Pair Corralation between Sportsmans Warehouse and Meiko Electronics

Assuming the 90 days horizon Sportsmans Warehouse Holdings is expected to generate 4.91 times more return on investment than Meiko Electronics. However, Sportsmans Warehouse is 4.91 times more volatile than Meiko Electronics Co. It trades about 0.24 of its potential returns per unit of risk. Meiko Electronics Co is currently generating about 0.05 per unit of risk. If you would invest  198.00  in Sportsmans Warehouse Holdings on October 9, 2024 and sell it today you would earn a total of  50.00  from holding Sportsmans Warehouse Holdings or generate 25.25% return on investment over 90 days.

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

Sportsmans Warehouse Holdings  vs.  Meiko Electronics Co

Sportsmans Warehouse

Risk-Adjusted Performance

0 of 100

Very Weak

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

Meiko Electronics

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Meiko Electronics Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Meiko Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sportsmans Warehouse and Meiko Electronics

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

The idea behind Sportsmans Warehouse Holdings and Meiko Electronics Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.