Correlation Between Vanguard Funds and Meiko Electronics

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

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

Diversification Opportunities for Vanguard Funds and Meiko Electronics

0.86

Correlation Coefficient

Vanguard Funds  Meiko Electronics

Very poor diversification

The 3 months correlation between Vanguard and Meiko is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics and Vanguard Funds 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 Vanguard Funds Public 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 Vanguard Funds i.e., Vanguard Funds and Meiko Electronics go up and down completely randomly.

Pair Corralation between Vanguard Funds and Meiko Electronics

Assuming the 90 days trading horizon Vanguard Funds is expected to generate 3.6 times less return on investment than Meiko Electronics. But when comparing it to its historical volatility, Vanguard Funds Public is 4.41 times less risky than Meiko Electronics. It trades about 0.24 of its potential returns per unit of risk. Meiko Electronics Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,640  in Meiko Electronics Co on September 13, 2024 and sell it today you would earn a total of  1,910  from holding Meiko Electronics Co or generate 52.47% return on investment over 90 days.

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

Vanguard Funds Public  vs.  Meiko Electronics Co

Vanguard Funds Public

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Vanguard Funds reported solid returns over the last few months and may actually be approaching a breakup point.

Meiko Electronics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meiko Electronics Co are ranked lower than 15 (%) 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 Vanguard Funds and Meiko Electronics

The main advantage of trading using opposite Vanguard Funds and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Funds 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 Vanguard Funds Public 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.