Correlation Between Meiko Electronics and ARITZIA INCSUBVTGSHS

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

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

Diversification Opportunities for Meiko Electronics and ARITZIA INCSUBVTGSHS

0.5

Correlation Coefficient

Meiko Electronics  ARITZIA INCSUBVTGSHS

Very weak diversification

The 3 months correlation between Meiko and ARITZIA is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Meiko Electronics Co and ARITZIA INCSUBVTGSHS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARITZIA INCSUBVTGSHS and Meiko Electronics 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 Meiko Electronics Co are associated (or correlated) with ARITZIA INCSUBVTGSHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARITZIA INCSUBVTGSHS has no effect on the direction of Meiko Electronics i.e., Meiko Electronics and ARITZIA INCSUBVTGSHS go up and down completely randomly.

Pair Corralation between Meiko Electronics and ARITZIA INCSUBVTGSHS

Assuming the 90 days horizon Meiko Electronics is expected to generate 1.15 times less return on investment than ARITZIA INCSUBVTGSHS. In addition to that, Meiko Electronics is 1.1 times more volatile than ARITZIA INCSUBVTGSHS. It trades about 0.21 of its total potential returns per unit of risk. ARITZIA INCSUBVTGSHS is currently generating about 0.26 per unit of volatility. If you would invest  2,840  in ARITZIA INCSUBVTGSHS on October 25, 2024 and sell it today you would earn a total of  1,740  from holding ARITZIA INCSUBVTGSHS or generate 61.27% return on investment over 90 days.

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

Meiko Electronics Co  vs.  ARITZIA INCSUBVTGSHS

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 fragile basic indicators, Meiko Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

ARITZIA INCSUBVTGSHS

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARITZIA INCSUBVTGSHS are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ARITZIA INCSUBVTGSHS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meiko Electronics and ARITZIA INCSUBVTGSHS

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

The idea behind Meiko Electronics Co and ARITZIA INCSUBVTGSHS 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.