Correlation Between DAIRY FARM and Meiko Electronics

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

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

Diversification Opportunities for DAIRY FARM and Meiko Electronics

0.7

Correlation Coefficient

DAIRY FARM  Meiko Electronics

Poor diversification

The 3 months correlation between DAIRY and Meiko is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics and DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and Meiko Electronics go up and down completely randomly.

Pair Corralation between DAIRY FARM and Meiko Electronics

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to under-perform the Meiko Electronics. But the stock apears to be less risky and, when comparing its historical volatility, DAIRY FARM INTL is 1.17 times less risky than Meiko Electronics. The stock trades about -0.2 of its potential returns per unit of risk. The Meiko Electronics Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,450  in Meiko Electronics Co on September 27, 2024 and sell it today you would earn a total of  100.00  from holding Meiko Electronics Co or generate 1.83% return on investment over 90 days.

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

DAIRY FARM INTL  vs.  Meiko Electronics Co

DAIRY FARM INTL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DAIRY FARM unveiled solid returns over the last few months and may actually be approaching a breakup point.

Meiko Electronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meiko Electronics Co are ranked lower than 11 (%) 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 DAIRY FARM and Meiko Electronics

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

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.