Correlation Between Methode Electronics and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and STMICROELECTRONICS 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 STMICROELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and STMICROELECTRONICS, you can compare the effects of market volatilities on Methode Electronics and STMICROELECTRONICS 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 STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and STMICROELECTRONICS.
Diversification Opportunities for Methode Electronics and STMICROELECTRONICS
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Methode and STMICROELECTRONICS is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of Methode Electronics i.e., Methode Electronics and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between Methode Electronics and STMICROELECTRONICS
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the STMICROELECTRONICS. In addition to that, Methode Electronics is 1.81 times more volatile than STMICROELECTRONICS. It trades about -0.04 of its total potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.03 per unit of volatility. If you would invest 3,708 in STMICROELECTRONICS on October 11, 2024 and sell it today you would lose (1,262) from holding STMICROELECTRONICS or give up 34.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. STMICROELECTRONICS
Performance |
| Timeline |
| Methode Electronics |
| STMICROELECTRONICS |
Methode Electronics and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and STMICROELECTRONICS
The main advantage of trading using opposite Methode Electronics and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.| Methode Electronics vs. Peijia Medical Limited | Methode Electronics vs. SPECTRAL MEDICAL | Methode Electronics vs. Sumitomo Rubber Industries | Methode Electronics vs. Diamyd Medical AB |
| STMICROELECTRONICS vs. Wyndham Hotels Resorts | STMICROELECTRONICS vs. Choice Hotels International | STMICROELECTRONICS vs. Summit Hotel Properties | STMICROELECTRONICS vs. Webster Financial |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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