Correlation Between Methode Electronics and HYDROFARM HLD
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and HYDROFARM HLD 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 HYDROFARM HLD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and HYDROFARM HLD GRP, you can compare the effects of market volatilities on Methode Electronics and HYDROFARM HLD 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 HYDROFARM HLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and HYDROFARM HLD.
Diversification Opportunities for Methode Electronics and HYDROFARM HLD
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Methode and HYDROFARM is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and HYDROFARM HLD GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYDROFARM HLD GRP 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 HYDROFARM HLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYDROFARM HLD GRP has no effect on the direction of Methode Electronics i.e., Methode Electronics and HYDROFARM HLD go up and down completely randomly.
Pair Corralation between Methode Electronics and HYDROFARM HLD
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the HYDROFARM HLD. But the stock apears to be less risky and, when comparing its historical volatility, Methode Electronics is 1.42 times less risky than HYDROFARM HLD. The stock trades about -0.04 of its potential returns per unit of risk. The HYDROFARM HLD GRP is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 155.00 in HYDROFARM HLD GRP on October 14, 2024 and sell it today you would lose (94.00) from holding HYDROFARM HLD GRP or give up 60.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. HYDROFARM HLD GRP
Performance |
| Timeline |
| Methode Electronics |
| HYDROFARM HLD GRP |
Methode Electronics and HYDROFARM HLD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and HYDROFARM HLD
The main advantage of trading using opposite Methode Electronics and HYDROFARM HLD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, HYDROFARM HLD 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 HYDROFARM HLD will offset losses from the drop in HYDROFARM HLD's long position.| Methode Electronics vs. Molina Healthcare | Methode Electronics vs. US Physical Therapy | Methode Electronics vs. X FAB Silicon Foundries | Methode Electronics vs. TRI CHEMICAL LABORATINC |
| HYDROFARM HLD vs. Delta Air Lines | HYDROFARM HLD vs. TT Electronics PLC | HYDROFARM HLD vs. KIMBALL ELECTRONICS | HYDROFARM HLD vs. Methode Electronics |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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