Correlation Between Global Ship and METHODE ELECTRONICS
Can any of the company-specific risk be diversified away by investing in both Global Ship and METHODE 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 Global Ship and METHODE ELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and METHODE ELECTRONICS, you can compare the effects of market volatilities on Global Ship and METHODE 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 Global Ship with a short position of METHODE ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and METHODE ELECTRONICS.
Diversification Opportunities for Global Ship and METHODE ELECTRONICS
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and METHODE is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and METHODE ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METHODE ELECTRONICS and Global Ship 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 Global Ship Lease are associated (or correlated) with METHODE ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METHODE ELECTRONICS has no effect on the direction of Global Ship i.e., Global Ship and METHODE ELECTRONICS go up and down completely randomly.
Pair Corralation between Global Ship and METHODE ELECTRONICS
Assuming the 90 days horizon Global Ship Lease is expected to under-perform the METHODE ELECTRONICS. But the stock apears to be less risky and, when comparing its historical volatility, Global Ship Lease is 2.44 times less risky than METHODE ELECTRONICS. The stock trades about -0.04 of its potential returns per unit of risk. The METHODE ELECTRONICS is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 870.00 in METHODE ELECTRONICS on August 28, 2024 and sell it today you would earn a total of 130.00 from holding METHODE ELECTRONICS or generate 14.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Global Ship Lease vs. METHODE ELECTRONICS
Performance |
| Timeline |
| Global Ship Lease |
| METHODE ELECTRONICS |
Global Ship and METHODE ELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and METHODE ELECTRONICS
The main advantage of trading using opposite Global Ship and METHODE ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship position performs unexpectedly, METHODE 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 METHODE ELECTRONICS will offset losses from the drop in METHODE ELECTRONICS's long position.| Global Ship vs. MeVis Medical Solutions | Global Ship vs. Apollo Medical Holdings | Global Ship vs. G III Apparel Group | Global Ship vs. Advanced Medical Solutions |
| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Microsoft | METHODE ELECTRONICS vs. Microsoft |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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