Correlation Between LEGACY IRON and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both LEGACY IRON 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 LEGACY IRON and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LEGACY IRON ORE and Methode Electronics, you can compare the effects of market volatilities on LEGACY IRON 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 LEGACY IRON with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGACY IRON and Methode Electronics.
Diversification Opportunities for LEGACY IRON and Methode Electronics
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between LEGACY and Methode is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding LEGACY IRON ORE and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and LEGACY IRON 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 LEGACY IRON ORE 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 LEGACY IRON i.e., LEGACY IRON and Methode Electronics go up and down completely randomly.
Pair Corralation between LEGACY IRON and Methode Electronics
Assuming the 90 days trading horizon LEGACY IRON ORE is expected to generate 0.13 times more return on investment than Methode Electronics. However, LEGACY IRON ORE is 7.78 times less risky than Methode Electronics. It trades about -0.07 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.06 per unit of risk. If you would invest 1.22 in LEGACY IRON ORE on September 1, 2024 and sell it today you would lose (0.17) from holding LEGACY IRON ORE or give up 13.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LEGACY IRON ORE vs. Methode Electronics
Performance |
| Timeline |
| LEGACY IRON ORE |
| Methode Electronics |
LEGACY IRON and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LEGACY IRON and Methode Electronics
The main advantage of trading using opposite LEGACY IRON and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEGACY IRON 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.| LEGACY IRON vs. SIVERS SEMICONDUCTORS AB | LEGACY IRON vs. Darden Restaurants | LEGACY IRON vs. Reliance Steel Aluminum | LEGACY IRON vs. Q2M Managementberatung AG |
| Methode Electronics vs. Southwest Airlines Co | Methode Electronics vs. Media and Games | Methode Electronics vs. NAKED WINES PLC | Methode Electronics vs. Singapore Airlines 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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