Correlation Between Meiko Electronics and Philip Morris

Can any of the company-specific risk be diversified away by investing in both Meiko Electronics and Philip Morris 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 Philip Morris 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 Philip Morris International, you can compare the effects of market volatilities on Meiko Electronics and Philip Morris 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 Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meiko Electronics and Philip Morris.

Diversification Opportunities for Meiko Electronics and Philip Morris

0.64

Correlation Coefficient

Meiko Electronics  Philip Morris

Poor diversification

The 3 months correlation between Meiko and Philip is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Meiko Electronics Co and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern 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 Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Meiko Electronics i.e., Meiko Electronics and Philip Morris go up and down completely randomly.

Pair Corralation between Meiko Electronics and Philip Morris

Assuming the 90 days horizon Meiko Electronics Co is expected to generate 1.77 times more return on investment than Philip Morris. However, Meiko Electronics is 1.77 times more volatile than Philip Morris International. It trades about 0.06 of its potential returns per unit of risk. Philip Morris International is currently generating about -0.25 per unit of risk. If you would invest  5,550  in Meiko Electronics Co on September 29, 2024 and sell it today you would earn a total of  100.00  from holding Meiko Electronics Co or generate 1.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Meiko Electronics Co  vs.  Philip Morris International

Meiko Electronics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meiko Electronics Co are ranked lower than 14 (%) 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.

Philip Morris Intern

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Meiko Electronics and Philip Morris

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

The idea behind Meiko Electronics Co and Philip Morris International 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.