Correlation Between AEON STORES and Meiko Electronics

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

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

Diversification Opportunities for AEON STORES and Meiko Electronics

-0.24

Correlation Coefficient

AEON STORES  Meiko Electronics

Very good diversification

The 3 months correlation between AEON and Meiko is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding AEON STORES and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics and AEON STORES 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 AEON STORES 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 AEON STORES i.e., AEON STORES and Meiko Electronics go up and down completely randomly.

Pair Corralation between AEON STORES and Meiko Electronics

Assuming the 90 days trading horizon AEON STORES is expected to under-perform the Meiko Electronics. In addition to that, AEON STORES is 1.5 times more volatile than Meiko Electronics Co. It trades about -0.06 of its total potential returns per unit of risk. Meiko Electronics Co is currently generating about 0.05 per unit of volatility. If you would invest  5,600  in Meiko Electronics Co on October 7, 2024 and sell it today you would earn a total of  50.00  from holding Meiko Electronics Co or generate 0.89% return on investment over 90 days.

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

AEON STORES  vs.  Meiko Electronics Co

AEON STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AEON STORES is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Meiko Electronics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meiko Electronics Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meiko Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AEON STORES and Meiko Electronics

The main advantage of trading using opposite AEON STORES and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEON STORES 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 AEON STORES 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.