Correlation Between Methode Electronics and Alaska Air
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Alaska Air 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 Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Alaska Air Group, you can compare the effects of market volatilities on Methode Electronics and Alaska Air 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 Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Alaska Air.
Diversification Opportunities for Methode Electronics and Alaska Air
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Methode and Alaska is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Alaska Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group 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 Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group has no effect on the direction of Methode Electronics i.e., Methode Electronics and Alaska Air go up and down completely randomly.
Pair Corralation between Methode Electronics and Alaska Air
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the Alaska Air. In addition to that, Methode Electronics is 1.67 times more volatile than Alaska Air Group. It trades about -0.26 of its total potential returns per unit of risk. Alaska Air Group is currently generating about 0.25 per unit of volatility. If you would invest 6,002 in Alaska Air Group on October 17, 2024 and sell it today you would earn a total of 510.00 from holding Alaska Air Group or generate 8.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. Alaska Air Group
Performance |
| Timeline |
| Methode Electronics |
| Alaska Air Group |
Methode Electronics and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Alaska Air
The main advantage of trading using opposite Methode Electronics and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Alaska Air 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 Alaska Air will offset losses from the drop in Alaska Air's long position.| Methode Electronics vs. SK TELECOM TDADR | Methode Electronics vs. Tianjin Capital Environmental | Methode Electronics vs. The Japan Steel | Methode Electronics vs. Xiwang Special Steel |
| Alaska Air vs. Meiko Electronics Co | Alaska Air vs. KIMBALL ELECTRONICS | Alaska Air vs. Methode Electronics | Alaska Air vs. ELECTRONIC ARTS |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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