Correlation Between Methode Electronics and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Lifeway Foods 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 Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Lifeway Foods, you can compare the effects of market volatilities on Methode Electronics and Lifeway Foods 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 Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Lifeway Foods.
Diversification Opportunities for Methode Electronics and Lifeway Foods
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Methode and Lifeway is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods 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 Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Methode Electronics i.e., Methode Electronics and Lifeway Foods go up and down completely randomly.
Pair Corralation between Methode Electronics and Lifeway Foods
Assuming the 90 days trading horizon Methode Electronics is expected to generate 0.73 times more return on investment than Lifeway Foods. However, Methode Electronics is 1.36 times less risky than Lifeway Foods. It trades about 0.25 of its potential returns per unit of risk. Lifeway Foods is currently generating about -0.01 per unit of risk. If you would invest 815.00 in Methode Electronics on September 1, 2024 and sell it today you would earn a total of 185.00 from holding Methode Electronics or generate 22.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. Lifeway Foods
Performance |
| Timeline |
| Methode Electronics |
| Lifeway Foods |
Methode Electronics and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Lifeway Foods
The main advantage of trading using opposite Methode Electronics and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Lifeway Foods 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 Lifeway Foods will offset losses from the drop in Lifeway Foods' long position.| Methode Electronics vs. Southwest Airlines Co | Methode Electronics vs. Media and Games | Methode Electronics vs. NAKED WINES PLC | Methode Electronics vs. Singapore Airlines Limited |
| Lifeway Foods vs. ScanSource | Lifeway Foods vs. Waste Management | Lifeway Foods vs. Brockhaus Capital Management | Lifeway Foods vs. Consolidated Communications Holdings |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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