Correlation Between REVO INSURANCE and Methode Electronics

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Can any of the company-specific risk be diversified away by investing in both REVO INSURANCE 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 REVO INSURANCE and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REVO INSURANCE SPA and Methode Electronics, you can compare the effects of market volatilities on REVO INSURANCE 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 REVO INSURANCE with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of REVO INSURANCE and Methode Electronics.

Diversification Opportunities for REVO INSURANCE and Methode Electronics

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between REVO and Methode is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding REVO INSURANCE SPA and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and REVO INSURANCE 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 REVO INSURANCE SPA 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 REVO INSURANCE i.e., REVO INSURANCE and Methode Electronics go up and down completely randomly.

Pair Corralation between REVO INSURANCE and Methode Electronics

Assuming the 90 days horizon REVO INSURANCE is expected to generate 1.87 times less return on investment than Methode Electronics. But when comparing it to its historical volatility, REVO INSURANCE SPA is 3.52 times less risky than Methode Electronics. It trades about 0.16 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  840.00  in Methode Electronics on August 29, 2024 and sell it today you would earn a total of  55.00  from holding Methode Electronics or generate 6.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

REVO INSURANCE SPA  vs.  Methode Electronics

 Performance 
       Timeline  
REVO INSURANCE SPA 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REVO INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.
Methode Electronics 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Methode Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Methode Electronics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

REVO INSURANCE and Methode Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with REVO INSURANCE and Methode Electronics

The main advantage of trading using opposite REVO INSURANCE and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REVO INSURANCE 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 REVO INSURANCE SPA 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.
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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