Correlation Between Meiko Electronics and NORWEGIAN AIR

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

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

Diversification Opportunities for Meiko Electronics and NORWEGIAN AIR

-0.09

Correlation Coefficient

Meiko Electronics  NORWEGIAN AIR

Good diversification

The 3 months correlation between Meiko and NORWEGIAN is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Meiko Electronics Co and NORWEGIAN AIR SHUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORWEGIAN AIR SHUT and Meiko 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 Meiko Electronics Co are associated (or correlated) with NORWEGIAN AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORWEGIAN AIR SHUT has no effect on the direction of Meiko Electronics i.e., Meiko Electronics and NORWEGIAN AIR go up and down completely randomly.

Pair Corralation between Meiko Electronics and NORWEGIAN AIR

Assuming the 90 days horizon Meiko Electronics Co is expected to generate 1.05 times more return on investment than NORWEGIAN AIR. However, Meiko Electronics is 1.05 times more volatile than NORWEGIAN AIR SHUT. It trades about 0.1 of its potential returns per unit of risk. NORWEGIAN AIR SHUT is currently generating about 0.03 per unit of risk. If you would invest  2,080  in Meiko Electronics Co on September 12, 2024 and sell it today you would earn a total of  3,520  from holding Meiko Electronics Co or generate 169.23% return on investment over 90 days.

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

Meiko Electronics Co  vs.  NORWEGIAN AIR SHUT

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.

NORWEGIAN AIR SHUT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NORWEGIAN AIR SHUT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, NORWEGIAN AIR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Meiko Electronics and NORWEGIAN AIR

The main advantage of trading using opposite Meiko Electronics and NORWEGIAN AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meiko Electronics position performs unexpectedly, NORWEGIAN AIR 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 NORWEGIAN AIR will offset losses from the drop in NORWEGIAN AIR's long position.

The idea behind Meiko Electronics Co and NORWEGIAN AIR SHUT 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.