Correlation Between Methode Electronics and Trimble
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Trimble 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 Trimble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Trimble, you can compare the effects of market volatilities on Methode Electronics and Trimble 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 Trimble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Trimble.
Diversification Opportunities for Methode Electronics and Trimble
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Methode and Trimble is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Trimble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trimble 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 Trimble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trimble has no effect on the direction of Methode Electronics i.e., Methode Electronics and Trimble go up and down completely randomly.
Pair Corralation between Methode Electronics and Trimble
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the Trimble. In addition to that, Methode Electronics is 2.11 times more volatile than Trimble. It trades about -0.04 of its total potential returns per unit of risk. Trimble is currently generating about 0.06 per unit of volatility. If you would invest 4,531 in Trimble on September 12, 2024 and sell it today you would earn a total of 2,511 from holding Trimble or generate 55.42% 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. Trimble
Performance |
| Timeline |
| Methode Electronics |
| Trimble |
Methode Electronics and Trimble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Trimble
The main advantage of trading using opposite Methode Electronics and Trimble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Trimble 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 Trimble will offset losses from the drop in Trimble'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 |
| Trimble vs. Methode Electronics | Trimble vs. ETFS Coffee ETC | Trimble vs. Meiko Electronics Co | Trimble vs. DATAGROUP SE |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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