Correlation Between Adidas AG and Meiko Electronics

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

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

Diversification Opportunities for Adidas AG and Meiko Electronics

0.11

Correlation Coefficient

Adidas AG  Meiko Electronics

Average diversification

The 3 months correlation between Adidas and Meiko is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding adidas AG and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics and Adidas AG 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 adidas AG 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 Adidas AG i.e., Adidas AG and Meiko Electronics go up and down completely randomly.

Pair Corralation between Adidas AG and Meiko Electronics

Assuming the 90 days trading horizon adidas AG is expected to generate 0.85 times more return on investment than Meiko Electronics. However, adidas AG is 1.18 times less risky than Meiko Electronics. It trades about -0.06 of its potential returns per unit of risk. Meiko Electronics Co is currently generating about -0.18 per unit of risk. If you would invest  11,900  in adidas AG on October 10, 2024 and sell it today you would lose (200.00) from holding adidas AG or give up 1.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

adidas AG  vs.  Meiko Electronics Co

adidas AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days adidas AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Adidas AG 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

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Meiko Electronics Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Meiko Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adidas AG and Meiko Electronics

The main advantage of trading using opposite Adidas AG and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adidas AG 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 adidas AG 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.