Correlation Between BG Foods and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both BG Foods 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 BG Foods and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BG Foods and Methode Electronics, you can compare the effects of market volatilities on BG Foods 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 BG Foods with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of BG Foods and Methode Electronics.
Diversification Opportunities for BG Foods and Methode Electronics
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between DHR and Methode is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and BG Foods 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 BG Foods 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 BG Foods i.e., BG Foods and Methode Electronics go up and down completely randomly.
Pair Corralation between BG Foods and Methode Electronics
Assuming the 90 days trading horizon BG Foods is expected to generate 0.76 times more return on investment than Methode Electronics. However, BG Foods is 1.32 times less risky than Methode Electronics. It trades about -0.02 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.05 per unit of risk. If you would invest 1,068 in BG Foods on October 16, 2024 and sell it today you would lose (444.00) from holding BG Foods or give up 41.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BG Foods vs. Methode Electronics
Performance |
| Timeline |
| BG Foods |
| Methode Electronics |
BG Foods and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BG Foods and Methode Electronics
The main advantage of trading using opposite BG Foods and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG Foods 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.| BG Foods vs. BJs Wholesale Club | BG Foods vs. SPARTAN STORES | BG Foods vs. Japan Tobacco | BG Foods vs. Scandinavian Tobacco Group |
| Methode Electronics vs. Monster Beverage Corp | Methode Electronics vs. BG Foods | Methode Electronics vs. THAI BEVERAGE | Methode Electronics vs. Fevertree Drinks PLC |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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