Correlation Between Methode Electronics and PAX GLOBAL
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and PAX GLOBAL 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 PAX GLOBAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and PAX GLOBAL TECH, you can compare the effects of market volatilities on Methode Electronics and PAX GLOBAL 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 PAX GLOBAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and PAX GLOBAL.
Diversification Opportunities for Methode Electronics and PAX GLOBAL
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Methode and PAX is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and PAX GLOBAL TECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAX GLOBAL TECH 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 PAX GLOBAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAX GLOBAL TECH has no effect on the direction of Methode Electronics i.e., Methode Electronics and PAX GLOBAL go up and down completely randomly.
Pair Corralation between Methode Electronics and PAX GLOBAL
Assuming the 90 days trading horizon Methode Electronics is expected to generate 2.12 times more return on investment than PAX GLOBAL. However, Methode Electronics is 2.12 times more volatile than PAX GLOBAL TECH. It trades about 0.14 of its potential returns per unit of risk. PAX GLOBAL TECH is currently generating about 0.15 per unit of risk. If you would invest 873.00 in Methode Electronics on September 12, 2024 and sell it today you would earn a total of 347.00 from holding Methode Electronics or generate 39.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Methode Electronics vs. PAX GLOBAL TECH
Performance |
| Timeline |
| Methode Electronics |
| PAX GLOBAL TECH |
Methode Electronics and PAX GLOBAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and PAX GLOBAL
The main advantage of trading using opposite Methode Electronics and PAX GLOBAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, PAX GLOBAL 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 PAX GLOBAL will offset losses from the drop in PAX GLOBAL's long position.| Methode Electronics vs. Sunny Optical Technology | Methode Electronics vs. Hubbell Incorporated | Methode Electronics vs. TDK Corporation | Methode Electronics vs. Superior Plus Corp |
| PAX GLOBAL vs. Western Copper and | PAX GLOBAL vs. Siamgas And Petrochemicals | PAX GLOBAL vs. Lion One Metals | PAX GLOBAL vs. AIR PRODCHEMICALS |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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