Correlation Between Kronos Worldwide and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Kronos Worldwide 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 Kronos Worldwide and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kronos Worldwide and Methode Electronics, you can compare the effects of market volatilities on Kronos Worldwide 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 Kronos Worldwide with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kronos Worldwide and Methode Electronics.
Diversification Opportunities for Kronos Worldwide and Methode Electronics
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Kronos and Methode is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Kronos Worldwide and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Kronos Worldwide 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 Kronos Worldwide 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 Kronos Worldwide i.e., Kronos Worldwide and Methode Electronics go up and down completely randomly.
Pair Corralation between Kronos Worldwide and Methode Electronics
Assuming the 90 days horizon Kronos Worldwide is expected to generate 2.05 times less return on investment than Methode Electronics. But when comparing it to its historical volatility, Kronos Worldwide is 1.64 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 0.05 of returns per unit of risk over similar time horizon. If you would invest 912.00 in Methode Electronics on September 2, 2024 and sell it today you would earn a total of 83.00 from holding Methode Electronics or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kronos Worldwide vs. Methode Electronics
Performance |
| Timeline |
| Kronos Worldwide |
| Methode Electronics |
Kronos Worldwide and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kronos Worldwide and Methode Electronics
The main advantage of trading using opposite Kronos Worldwide and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kronos Worldwide 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.| Kronos Worldwide vs. Pembina Pipeline Corp | Kronos Worldwide vs. Perseus Mining Limited | Kronos Worldwide vs. Western Copper and | Kronos Worldwide vs. Goodyear Tire Rubber |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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