Correlation Between Raytheon Technologies and METHODE ELECTRONICS
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies 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 Raytheon Technologies and METHODE ELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raytheon Technologies Corp and METHODE ELECTRONICS, you can compare the effects of market volatilities on Raytheon Technologies 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 Raytheon Technologies with a short position of METHODE ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and METHODE ELECTRONICS.
Diversification Opportunities for Raytheon Technologies and METHODE ELECTRONICS
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Raytheon and METHODE is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and METHODE ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METHODE ELECTRONICS and Raytheon Technologies 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 Raytheon Technologies Corp 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 Raytheon Technologies i.e., Raytheon Technologies and METHODE ELECTRONICS go up and down completely randomly.
Pair Corralation between Raytheon Technologies and METHODE ELECTRONICS
Assuming the 90 days horizon Raytheon Technologies is expected to generate 8.15 times less return on investment than METHODE ELECTRONICS. But when comparing it to its historical volatility, Raytheon Technologies Corp is 2.78 times less risky than METHODE ELECTRONICS. It trades about 0.09 of its potential returns per unit of risk. METHODE ELECTRONICS is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 810.00 in METHODE ELECTRONICS on September 1, 2024 and sell it today you would earn a total of 230.00 from holding METHODE ELECTRONICS or generate 28.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Raytheon Technologies Corp vs. METHODE ELECTRONICS
Performance |
| Timeline |
| Raytheon Technologies |
| METHODE ELECTRONICS |
Raytheon Technologies and METHODE ELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raytheon Technologies and METHODE ELECTRONICS
The main advantage of trading using opposite Raytheon Technologies and METHODE ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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.| Raytheon Technologies vs. PENN NATL GAMING | Raytheon Technologies vs. Liberty Broadband | Raytheon Technologies vs. Charter Communications | Raytheon Technologies vs. HOCHSCHILD MINING |
| METHODE ELECTRONICS vs. SIVERS SEMICONDUCTORS AB | METHODE ELECTRONICS vs. Darden Restaurants | METHODE ELECTRONICS vs. Reliance Steel Aluminum | METHODE ELECTRONICS vs. Q2M Managementberatung AG |
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 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.
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