Correlation Between BURLINGTON STORES and Meiko Electronics

Can any of the company-specific risk be diversified away by investing in both BURLINGTON 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 BURLINGTON 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 BURLINGTON STORES and Meiko Electronics Co, you can compare the effects of market volatilities on BURLINGTON 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 BURLINGTON STORES with a short position of Meiko Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of BURLINGTON STORES and Meiko Electronics.

Diversification Opportunities for BURLINGTON STORES and Meiko Electronics

0.87

Correlation Coefficient

BURLINGTON STORES  Meiko Electronics

Very poor diversification

The 3 months correlation between BURLINGTON and Meiko is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BURLINGTON 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 BURLINGTON 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 BURLINGTON 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 BURLINGTON STORES i.e., BURLINGTON STORES and Meiko Electronics go up and down completely randomly.

Pair Corralation between BURLINGTON STORES and Meiko Electronics

Assuming the 90 days trading horizon BURLINGTON STORES is expected to under-perform the Meiko Electronics. But the stock apears to be less risky and, when comparing its historical volatility, BURLINGTON STORES is 1.02 times less risky than Meiko Electronics. The stock trades about -0.15 of its potential returns per unit of risk. The Meiko Electronics Co is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  5,650  in Meiko Electronics Co on December 24, 2024 and sell it today you would lose (1,150) from holding Meiko Electronics Co or give up 20.35% of portfolio value over 90 days.

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

BURLINGTON STORES  vs.  Meiko Electronics Co

BURLINGTON STORES

Risk-Adjusted Performance

Very Weak

Over the last 90 days BURLINGTON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Meiko Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meiko Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BURLINGTON STORES and Meiko Electronics

The main advantage of trading using opposite BURLINGTON STORES and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BURLINGTON 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 BURLINGTON 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.