Correlation Between American Public and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both American Public 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 American Public and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Public Education and Methode Electronics, you can compare the effects of market volatilities on American Public 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 American Public with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and Methode Electronics.
Diversification Opportunities for American Public and Methode Electronics
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Methode is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and American Public 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 American Public Education 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 American Public i.e., American Public and Methode Electronics go up and down completely randomly.
Pair Corralation between American Public and Methode Electronics
Assuming the 90 days horizon American Public Education is expected to generate 1.0 times more return on investment than Methode Electronics. However, American Public Education is 1.0 times less risky than Methode Electronics. It trades about 0.44 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.26 per unit of risk. If you would invest 1,370 in American Public Education on September 4, 2024 and sell it today you would earn a total of 590.00 from holding American Public Education or generate 43.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Public Education vs. Methode Electronics
Performance |
| Timeline |
| American Public Education |
| Methode Electronics |
American Public and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Public and Methode Electronics
The main advantage of trading using opposite American Public and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public 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' long position.The idea behind American Public Education and Methode Electronics 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.| Methode Electronics vs. Performance Food Group | Methode Electronics vs. CN MODERN DAIRY | Methode Electronics vs. PT Indofood Sukses | Methode Electronics vs. Astral Foods Limited |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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