Correlation Between Methode Electronics and AECOM TECHNOLOGY
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and AECOM TECHNOLOGY, you can compare the effects of market volatilities on Methode Electronics and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and AECOM TECHNOLOGY.
Diversification Opportunities for Methode Electronics and AECOM TECHNOLOGY
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Methode and AECOM is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM TECHNOLOGY has no effect on the direction of Methode Electronics i.e., Methode Electronics and AECOM TECHNOLOGY go up and down completely randomly.
Pair Corralation between Methode Electronics and AECOM TECHNOLOGY
Assuming the 90 days trading horizon Methode Electronics is expected to generate 2.43 times more return on investment than AECOM TECHNOLOGY. However, Methode Electronics is 2.43 times more volatile than AECOM TECHNOLOGY. It trades about -0.09 of its potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about -0.23 per unit of risk. If you would invest 1,170 in Methode Electronics on November 29, 2024 and sell it today you would lose (90.00) from holding Methode Electronics or give up 7.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Methode Electronics vs. AECOM TECHNOLOGY
Performance |
| Timeline |
| Methode Electronics |
| AECOM TECHNOLOGY |
Methode Electronics and AECOM TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and AECOM TECHNOLOGY
The main advantage of trading using opposite Methode Electronics and AECOM TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, AECOM TECHNOLOGY 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 AECOM TECHNOLOGY will offset losses from the drop in AECOM TECHNOLOGY's long position.| Methode Electronics vs. PLAYTECH | Methode Electronics vs. LG Display Co | Methode Electronics vs. USWE SPORTS AB | Methode Electronics vs. Air Transport Services |
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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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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