Correlation Between China Resources and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both China Resources 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 China Resources and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Beer and Methode Electronics, you can compare the effects of market volatilities on China Resources 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 China Resources with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Methode Electronics.
Diversification Opportunities for China Resources and Methode Electronics
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Methode is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and Methode Electronics go up and down completely randomly.
Pair Corralation between China Resources and Methode Electronics
Assuming the 90 days horizon China Resources Beer is expected to under-perform the Methode Electronics. But the stock apears to be less risky and, when comparing its historical volatility, China Resources Beer is 1.02 times less risky than Methode Electronics. The stock trades about -0.09 of its potential returns per unit of risk. The Methode Electronics is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 815.00 in Methode Electronics on September 1, 2024 and sell it today you would earn a total of 185.00 from holding Methode Electronics or generate 22.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. Methode Electronics
Performance |
| Timeline |
| China Resources Beer |
| Methode Electronics |
China Resources and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Methode Electronics
The main advantage of trading using opposite China Resources and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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.| China Resources vs. MOLSON RS BEVERAGE | China Resources vs. Superior Plus Corp | China Resources vs. NMI Holdings | China Resources vs. Origin Agritech |
| 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 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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