Correlation Between Methode Electronics and China Resources
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and China Resources Beer, you can compare the effects of market volatilities on Methode Electronics and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and China Resources.
Diversification Opportunities for Methode Electronics and China Resources
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Methode and China is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Methode Electronics i.e., Methode Electronics and China Resources go up and down completely randomly.
Pair Corralation between Methode Electronics and China Resources
Assuming the 90 days trading horizon Methode Electronics is expected to generate 0.96 times more return on investment than China Resources. However, Methode Electronics is 1.05 times less risky than China Resources. It trades about 0.01 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.12 per unit of risk. If you would invest 1,006 in Methode Electronics on September 3, 2024 and sell it today you would lose (11.00) from holding Methode Electronics or give up 1.09% 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. China Resources Beer
Performance |
| Timeline |
| Methode Electronics |
| China Resources Beer |
Methode Electronics and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and China Resources
The main advantage of trading using opposite Methode Electronics and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| Methode Electronics vs. Hon Hai Precision | Methode Electronics vs. Samsung SDI Co | Methode Electronics vs. Murata Manufacturing Co | Methode Electronics vs. Mitsubishi Electric |
| China Resources vs. Chuangs China Investments | China Resources vs. PennyMac Mortgage Investment | China Resources vs. Wyndham Hotels Resorts | China Resources vs. MHP Hotel AG |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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