Correlation Between TT Electronics and Meiko Electronics

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Can any of the company-specific risk be diversified away by investing in both TT Electronics 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 TT Electronics and Meiko Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TT Electronics PLC and Meiko Electronics Co, you can compare the effects of market volatilities on TT Electronics 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 TT Electronics with a short position of Meiko Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of TT Electronics and Meiko Electronics.

Diversification Opportunities for TT Electronics and Meiko Electronics

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between 7TT and Meiko is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TT Electronics PLC and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics and TT 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 TT Electronics PLC 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 TT Electronics i.e., TT Electronics and Meiko Electronics go up and down completely randomly.

Pair Corralation between TT Electronics and Meiko Electronics

Assuming the 90 days trading horizon TT Electronics PLC is expected to under-perform the Meiko Electronics. But the stock apears to be less risky and, when comparing its historical volatility, TT Electronics PLC is 1.07 times less risky than Meiko Electronics. The stock trades about -0.01 of its potential returns per unit of risk. The Meiko Electronics Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Meiko Electronics Co on September 23, 2024 and sell it today you would earn a total of  3,850  from holding Meiko Electronics Co or generate 226.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

TT Electronics PLC  vs.  Meiko Electronics Co

 Performance 
       Timeline  
TT Electronics PLC 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in TT Electronics PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TT Electronics unveiled solid returns over the last few months and may actually be approaching a breakup point.
Meiko Electronics 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
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.

TT Electronics and Meiko Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TT Electronics and Meiko Electronics

The main advantage of trading using opposite TT Electronics and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TT Electronics 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 TT Electronics PLC 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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