Correlation Between Methode Electronics and Commercial Vehicle
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Commercial Vehicle 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 Commercial Vehicle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Commercial Vehicle Group, you can compare the effects of market volatilities on Methode Electronics and Commercial Vehicle 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 Commercial Vehicle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Commercial Vehicle.
Diversification Opportunities for Methode Electronics and Commercial Vehicle
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Methode and Commercial is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Commercial Vehicle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Vehicle 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 Commercial Vehicle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Vehicle has no effect on the direction of Methode Electronics i.e., Methode Electronics and Commercial Vehicle go up and down completely randomly.
Pair Corralation between Methode Electronics and Commercial Vehicle
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the Commercial Vehicle. In addition to that, Methode Electronics is 1.25 times more volatile than Commercial Vehicle Group. It trades about -0.06 of its total potential returns per unit of risk. Commercial Vehicle Group is currently generating about -0.06 per unit of volatility. If you would invest 660.00 in Commercial Vehicle Group on September 4, 2024 and sell it today you would lose (438.00) from holding Commercial Vehicle Group or give up 66.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. Commercial Vehicle Group
Performance |
| Timeline |
| Methode Electronics |
| Commercial Vehicle |
Methode Electronics and Commercial Vehicle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Commercial Vehicle
The main advantage of trading using opposite Methode Electronics and Commercial Vehicle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Commercial Vehicle 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 Commercial Vehicle will offset losses from the drop in Commercial Vehicle's long position.| Methode Electronics vs. Performance Food Group | Methode Electronics vs. CN MODERN DAIRY | Methode Electronics vs. PT Indofood Sukses | Methode Electronics vs. Astral Foods Limited |
| Commercial Vehicle vs. Casio Computer CoLtd | Commercial Vehicle vs. Bumrungrad Hospital Public | Commercial Vehicle vs. Microchip Technology Incorporated | Commercial Vehicle vs. Micron Technology |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |