Correlation Between Methode Electronics and SBA Communications
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and SBA Communications 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 SBA Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and SBA Communications Corp, you can compare the effects of market volatilities on Methode Electronics and SBA Communications 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 SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and SBA Communications.
Diversification Opportunities for Methode Electronics and SBA Communications
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Methode and SBA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp 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 SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of Methode Electronics i.e., Methode Electronics and SBA Communications go up and down completely randomly.
Pair Corralation between Methode Electronics and SBA Communications
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the SBA Communications. In addition to that, Methode Electronics is 2.64 times more volatile than SBA Communications Corp. It trades about -0.03 of its total potential returns per unit of risk. SBA Communications Corp is currently generating about 0.01 per unit of volatility. If you would invest 20,176 in SBA Communications Corp on September 12, 2024 and sell it today you would earn a total of 424.00 from holding SBA Communications Corp or generate 2.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. SBA Communications Corp
Performance |
| Timeline |
| Methode Electronics |
| SBA Communications Corp |
Methode Electronics and SBA Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and SBA Communications
The main advantage of trading using opposite Methode Electronics and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, SBA Communications 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 SBA Communications will offset losses from the drop in SBA Communications' long position.| Methode Electronics vs. Sunny Optical Technology | Methode Electronics vs. Hubbell Incorporated | Methode Electronics vs. TDK Corporation | Methode Electronics vs. Superior Plus Corp |
| SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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