Correlation Between Datang International and Meiko Electronics
Can any of the company-specific risk be diversified away by investing in both Datang International 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 Datang International and Meiko Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Datang International Power and Meiko Electronics Co, you can compare the effects of market volatilities on Datang International 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 Datang International with a short position of Meiko Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datang International and Meiko Electronics.
Diversification Opportunities for Datang International and Meiko Electronics
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Datang and Meiko is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics and Datang International 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 Datang International Power 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 Datang International i.e., Datang International and Meiko Electronics go up and down completely randomly.
Pair Corralation between Datang International and Meiko Electronics
Assuming the 90 days horizon Datang International is expected to generate 3.54 times less return on investment than Meiko Electronics. But when comparing it to its historical volatility, Datang International Power is 1.16 times less risky than Meiko Electronics. It trades about 0.04 of its potential returns per unit of risk. Meiko Electronics Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,980 in Meiko Electronics Co on September 24, 2024 and sell it today you would earn a total of 2,570 from holding Meiko Electronics Co or generate 86.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Datang International Power vs. Meiko Electronics Co
Performance |
| Timeline |
| Datang International |
| Meiko Electronics |
Datang International and Meiko Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Datang International and Meiko Electronics
The main advantage of trading using opposite Datang International and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datang International 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.| Datang International vs. Yuexiu Transport Infrastructure | Datang International vs. Verizon Communications | Datang International vs. TITANIUM TRANSPORTGROUP | Datang International vs. QUEEN S ROAD |
| Meiko Electronics vs. Grand Canyon Education | Meiko Electronics vs. Playa Hotels Resorts | Meiko Electronics vs. Summit Hotel Properties | Meiko Electronics vs. G8 EDUCATION |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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