Correlation Between Littelfuse and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Littelfuse 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 Littelfuse and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Littelfuse and Methode Electronics, you can compare the effects of market volatilities on Littelfuse 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 Littelfuse with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Littelfuse and Methode Electronics.
Diversification Opportunities for Littelfuse and Methode Electronics
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Littelfuse and Methode is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Littelfuse and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Littelfuse 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 Littelfuse 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 Littelfuse i.e., Littelfuse and Methode Electronics go up and down completely randomly.
Pair Corralation between Littelfuse and Methode Electronics
Given the investment horizon of 90 days Littelfuse is expected to generate 0.47 times more return on investment than Methode Electronics. However, Littelfuse is 2.12 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 -0.06 per unit of risk. If you would invest 23,303 in Littelfuse on August 28, 2024 and sell it today you would earn a total of 1,836 from holding Littelfuse or generate 7.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Littelfuse vs. Methode Electronics
Performance |
| Timeline |
| Littelfuse |
| Methode Electronics |
Littelfuse and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Littelfuse and Methode Electronics
The main advantage of trading using opposite Littelfuse and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Littelfuse 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.| Littelfuse vs. Plexus Corp | Littelfuse vs. Celestica | Littelfuse vs. Benchmark Electronics | Littelfuse vs. Flex |
| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode Electronics vs. Celestica |
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 Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |