Correlation Between Methode Electronics and G8 EDUCATION
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and G8 EDUCATION 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 Methode Electronics and G8 EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and G8 EDUCATION, you can compare the effects of market volatilities on Methode Electronics and G8 EDUCATION 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 Methode Electronics with a short position of G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and G8 EDUCATION.
Diversification Opportunities for Methode Electronics and G8 EDUCATION
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Methode and 3EAG is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 EDUCATION and Methode Electronics 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 Methode Electronics are associated (or correlated) with G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of Methode Electronics i.e., Methode Electronics and G8 EDUCATION go up and down completely randomly.
Pair Corralation between Methode Electronics and G8 EDUCATION
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the G8 EDUCATION. In addition to that, Methode Electronics is 2.02 times more volatile than G8 EDUCATION. It trades about -0.06 of its total potential returns per unit of risk. G8 EDUCATION is currently generating about 0.05 per unit of volatility. If you would invest 57.00 in G8 EDUCATION on September 4, 2024 and sell it today you would earn a total of 23.00 from holding G8 EDUCATION or generate 40.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
Methode Electronics vs. G8 EDUCATION
Performance |
| Timeline |
| Methode Electronics |
| G8 EDUCATION |
Methode Electronics and G8 EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and G8 EDUCATION
The main advantage of trading using opposite Methode Electronics and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, G8 EDUCATION 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.| Methode Electronics vs. Performance Food Group | Methode Electronics vs. CN MODERN DAIRY | Methode Electronics vs. PT Indofood Sukses | Methode Electronics vs. Astral Foods Limited |
| G8 EDUCATION vs. TOTAL GABON | G8 EDUCATION vs. Walgreens Boots Alliance | G8 EDUCATION vs. Peak Resources 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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