Correlation Between EMBARK EDUCATION and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both EMBARK EDUCATION 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 EMBARK EDUCATION and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMBARK EDUCATION LTD and Methode Electronics, you can compare the effects of market volatilities on EMBARK EDUCATION 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 EMBARK EDUCATION with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMBARK EDUCATION and Methode Electronics.
Diversification Opportunities for EMBARK EDUCATION and Methode Electronics
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between EMBARK and Methode is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding EMBARK EDUCATION LTD and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and EMBARK EDUCATION 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 EMBARK EDUCATION LTD 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 EMBARK EDUCATION i.e., EMBARK EDUCATION and Methode Electronics go up and down completely randomly.
Pair Corralation between EMBARK EDUCATION and Methode Electronics
Assuming the 90 days horizon EMBARK EDUCATION LTD is expected to generate 0.38 times more return on investment than Methode Electronics. However, EMBARK EDUCATION LTD is 2.61 times less risky than Methode Electronics. It trades about 0.04 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.06 per unit of risk. If you would invest 24.00 in EMBARK EDUCATION LTD on September 4, 2024 and sell it today you would earn a total of 7.00 from holding EMBARK EDUCATION LTD or generate 29.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
EMBARK EDUCATION LTD vs. Methode Electronics
Performance |
| Timeline |
| EMBARK EDUCATION LTD |
| Methode Electronics |
EMBARK EDUCATION and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMBARK EDUCATION and Methode Electronics
The main advantage of trading using opposite EMBARK EDUCATION and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMBARK EDUCATION 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 EMBARK EDUCATION LTD 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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