Correlation Between Methode Electronics and ScanSource
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and ScanSource 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 ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and ScanSource, you can compare the effects of market volatilities on Methode Electronics and ScanSource 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 ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and ScanSource.
Diversification Opportunities for Methode Electronics and ScanSource
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Methode and ScanSource is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Methode Electronics i.e., Methode Electronics and ScanSource go up and down completely randomly.
Pair Corralation between Methode Electronics and ScanSource
Assuming the 90 days trading horizon Methode Electronics is expected to generate 1.47 times more return on investment than ScanSource. However, Methode Electronics is 1.47 times more volatile than ScanSource. It trades about 0.07 of its potential returns per unit of risk. ScanSource is currently generating about 0.02 per unit of risk. If you would invest 912.00 in Methode Electronics on August 30, 2024 and sell it today you would earn a total of 118.00 from holding Methode Electronics or generate 12.94% 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. ScanSource
Performance |
| Timeline |
| Methode Electronics |
| ScanSource |
Methode Electronics and ScanSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and ScanSource
The main advantage of trading using opposite Methode Electronics and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, ScanSource 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 ScanSource will offset losses from the drop in ScanSource's long position.| Methode Electronics vs. Hochschild Mining plc | Methode Electronics vs. OURGAME INTHOLDL 00005 | Methode Electronics vs. MagnaChip Semiconductor Corp | Methode Electronics vs. CI GAMES SA |
| ScanSource vs. Boyd Gaming | ScanSource vs. NXP Semiconductors NV | ScanSource vs. Media and Games | ScanSource vs. ANGLER GAMING PLC |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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