Correlation Between Methode Electronics and RenaissanceRe Holdings
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and RenaissanceRe Holdings 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 RenaissanceRe Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and RenaissanceRe Holdings, you can compare the effects of market volatilities on Methode Electronics and RenaissanceRe Holdings 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 RenaissanceRe Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and RenaissanceRe Holdings.
Diversification Opportunities for Methode Electronics and RenaissanceRe Holdings
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Methode and RenaissanceRe is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and RenaissanceRe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenaissanceRe Holdings 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 RenaissanceRe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenaissanceRe Holdings has no effect on the direction of Methode Electronics i.e., Methode Electronics and RenaissanceRe Holdings go up and down completely randomly.
Pair Corralation between Methode Electronics and RenaissanceRe Holdings
Assuming the 90 days trading horizon Methode Electronics is expected to generate 3.27 times more return on investment than RenaissanceRe Holdings. However, Methode Electronics is 3.27 times more volatile than RenaissanceRe Holdings. It trades about 0.17 of its potential returns per unit of risk. RenaissanceRe Holdings is currently generating about -0.3 per unit of risk. If you would invest 990.00 in Methode Electronics on September 24, 2024 and sell it today you would earn a total of 180.00 from holding Methode Electronics or generate 18.18% 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. RenaissanceRe Holdings
Performance |
| Timeline |
| Methode Electronics |
| RenaissanceRe Holdings |
Methode Electronics and RenaissanceRe Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and RenaissanceRe Holdings
The main advantage of trading using opposite Methode Electronics and RenaissanceRe Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, RenaissanceRe Holdings 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 RenaissanceRe Holdings will offset losses from the drop in RenaissanceRe Holdings' long position.| Methode Electronics vs. Amphenol | Methode Electronics vs. Hon Hai Precision | Methode Electronics vs. Samsung SDI Co | Methode Electronics vs. Murata Manufacturing Co |
| RenaissanceRe Holdings vs. Methode Electronics | RenaissanceRe Holdings vs. TT Electronics PLC | RenaissanceRe Holdings vs. Strategic Education | RenaissanceRe Holdings vs. DeVry Education Group |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |