Correlation Between Choice Hotels and Meiko Electronics
Can any of the company-specific risk be diversified away by investing in both Choice Hotels 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 Choice Hotels and Meiko Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Choice Hotels International and Meiko Electronics Co, you can compare the effects of market volatilities on Choice Hotels 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 Choice Hotels with a short position of Meiko Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Meiko Electronics.
Diversification Opportunities for Choice Hotels and Meiko Electronics
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Choice and Meiko is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics and Choice Hotels 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 Choice Hotels International 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 Choice Hotels i.e., Choice Hotels and Meiko Electronics go up and down completely randomly.
Pair Corralation between Choice Hotels and Meiko Electronics
Assuming the 90 days horizon Choice Hotels is expected to generate 2.73 times less return on investment than Meiko Electronics. But when comparing it to its historical volatility, Choice Hotels International is 2.38 times less risky than Meiko Electronics. It trades about 0.1 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 3,120 in Meiko Electronics Co on September 3, 2024 and sell it today you would earn a total of 2,580 from holding Meiko Electronics Co or generate 82.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Choice Hotels International vs. Meiko Electronics Co
Performance |
Timeline |
Choice Hotels Intern |
Meiko Electronics |
Choice Hotels and Meiko Electronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Choice Hotels and Meiko Electronics
The main advantage of trading using opposite Choice Hotels and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels 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.Choice Hotels vs. Check Point Software | Choice Hotels vs. AXWAY SOFTWARE EO | Choice Hotels vs. ECHO INVESTMENT ZY | Choice Hotels vs. Take Two Interactive Software |
Meiko Electronics vs. KCE EL PCL | Meiko Electronics vs. Benchmark Electronics | Meiko Electronics vs. Superior Plus Corp | Meiko Electronics vs. NMI Holdings |
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 Stocks Directory module to find actively traded stocks across global markets.
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