Correlation Between Methode Electronics and Salesforce
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Salesforce 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 Salesforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Salesforce, you can compare the effects of market volatilities on Methode Electronics and Salesforce 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 Salesforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Salesforce.
Diversification Opportunities for Methode Electronics and Salesforce
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Methode and Salesforce is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Methode Electronics i.e., Methode Electronics and Salesforce go up and down completely randomly.
Pair Corralation between Methode Electronics and Salesforce
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the Salesforce. In addition to that, Methode Electronics is 2.12 times more volatile than Salesforce. It trades about -0.03 of its total potential returns per unit of risk. Salesforce is currently generating about 0.07 per unit of volatility. If you would invest 23,327 in Salesforce on September 4, 2024 and sell it today you would earn a total of 8,343 from holding Salesforce or generate 35.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Methode Electronics vs. Salesforce
Performance |
| Timeline |
| Methode Electronics |
| Salesforce |
Methode Electronics and Salesforce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Salesforce
The main advantage of trading using opposite Methode Electronics and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Salesforce 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 Salesforce will offset losses from the drop in Salesforce'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 |
| Salesforce vs. Rocket Internet SE | Salesforce vs. Superior Plus Corp | Salesforce vs. NMI Holdings | Salesforce vs. Origin Agritech |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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