Correlation Between Meiko Electronics and TERADYNE

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

Diversification Opportunities for Meiko Electronics and TERADYNE

-0.21

Correlation Coefficient

Meiko Electronics  TERADYNE

Very good diversification

The 3 months correlation between Meiko and TERADYNE is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Meiko Electronics Co and TERADYNE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADYNE 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 TERADYNE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TERADYNE has no effect on the direction of Meiko Electronics i.e., Meiko Electronics and TERADYNE go up and down completely randomly.

Pair Corralation between Meiko Electronics and TERADYNE

Assuming the 90 days horizon Meiko Electronics is expected to generate 8.43 times less return on investment than TERADYNE. But when comparing it to its historical volatility, Meiko Electronics Co is 1.15 times less risky than TERADYNE. It trades about 0.05 of its potential returns per unit of risk. TERADYNE is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  10,010  in TERADYNE on September 23, 2024 and sell it today you would earn a total of  1,944  from holding TERADYNE or generate 19.42% return on investment over 90 days.

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

Meiko Electronics Co  vs.  TERADYNE

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.

TERADYNE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TERADYNE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, TERADYNE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Meiko Electronics and TERADYNE

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

The idea behind Meiko Electronics Co and TERADYNE 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.