Correlation Between Methode Electronics and China Communications
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and China 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 China 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 China Communications Services, you can compare the effects of market volatilities on Methode Electronics and China 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 China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and China Communications.
Diversification Opportunities for Methode Electronics and China Communications
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Methode and China is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Methode Electronics i.e., Methode Electronics and China Communications go up and down completely randomly.
Pair Corralation between Methode Electronics and China Communications
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the China Communications. But the stock apears to be less risky and, when comparing its historical volatility, Methode Electronics is 1.35 times less risky than China Communications. The stock trades about -0.29 of its potential returns per unit of risk. The China Communications Services is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 53.00 in China Communications Services on November 28, 2024 and sell it today you would earn a total of 18.00 from holding China Communications Services or generate 33.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. China Communications Services
Performance |
| Timeline |
| Methode Electronics |
| China Communications |
Methode Electronics and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and China Communications
The main advantage of trading using opposite Methode Electronics and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, China 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 China Communications will offset losses from the drop in China Communications' long position.| Methode Electronics vs. Elmos Semiconductor SE | Methode Electronics vs. CREDIT AGRICOLE | Methode Electronics vs. Magnachip Semiconductor | Methode Electronics vs. BE Semiconductor Industries |
| China Communications vs. Playtech plc | China Communications vs. ASPEN TECHINC DL | China Communications vs. BioNTech SE | China Communications vs. FARO TECHNOLOGIES |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |