Correlation Between BII Railway and Meiko Electronics

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

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

Diversification Opportunities for BII Railway and Meiko Electronics

-0.15

Correlation Coefficient

BII Railway  Meiko Electronics

Good diversification

The 3 months correlation between BII and Meiko is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics and BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and Meiko Electronics go up and down completely randomly.

Pair Corralation between BII Railway and Meiko Electronics

Assuming the 90 days horizon BII Railway Transportation is expected to under-perform the Meiko Electronics. But the stock apears to be less risky and, when comparing its historical volatility, BII Railway Transportation is 1.04 times less risky than Meiko Electronics. The stock trades about -0.06 of its potential returns per unit of risk. The Meiko Electronics Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  5,650  in Meiko Electronics Co on October 26, 2024 and sell it today you would lose (100.00) from holding Meiko Electronics Co or give up 1.77% of portfolio value over 90 days.

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

BII Railway Transportation  vs.  Meiko Electronics Co

BII Railway Transpor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BII Railway may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Meiko Electronics

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Meiko Electronics Co are ranked lower than 17 (%) 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 BII Railway and Meiko Electronics

The main advantage of trading using opposite BII Railway and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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 BII Railway Transportation 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.