Correlation Between Methode Electronics and Patterson Companies
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Patterson Companies 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 Patterson Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Patterson Companies, you can compare the effects of market volatilities on Methode Electronics and Patterson Companies 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 Patterson Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Patterson Companies.
Diversification Opportunities for Methode Electronics and Patterson Companies
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Methode and Patterson is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Methode Electronics i.e., Methode Electronics and Patterson Companies go up and down completely randomly.
Pair Corralation between Methode Electronics and Patterson Companies
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the Patterson Companies. In addition to that, Methode Electronics is 1.89 times more volatile than Patterson Companies. It trades about -0.04 of its total potential returns per unit of risk. Patterson Companies is currently generating about 0.0 per unit of volatility. If you would invest 2,391 in Patterson Companies on September 13, 2024 and sell it today you would lose (211.00) from holding Patterson Companies or give up 8.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. Patterson Companies
Performance |
| Timeline |
| Methode Electronics |
| Patterson Companies |
Methode Electronics and Patterson Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Patterson Companies
The main advantage of trading using opposite Methode Electronics and Patterson Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Patterson Companies 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 Patterson Companies will offset losses from the drop in Patterson Companies' long position.| Methode Electronics vs. Sunny Optical Technology | Methode Electronics vs. Hubbell Incorporated | Methode Electronics vs. TDK Corporation | Methode Electronics vs. Superior Plus Corp |
| Patterson Companies vs. Methode Electronics | Patterson Companies vs. THAI BEVERAGE | Patterson Companies vs. ARROW ELECTRONICS | Patterson Companies vs. Monster Beverage Corp |
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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