Correlation Between Methode Electronics and Tesla
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Tesla 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 Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Tesla Inc, you can compare the effects of market volatilities on Methode Electronics and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Tesla.
Diversification Opportunities for Methode Electronics and Tesla
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Methode and Tesla is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Methode Electronics i.e., Methode Electronics and Tesla go up and down completely randomly.
Pair Corralation between Methode Electronics and Tesla
Assuming the 90 days trading horizon Methode Electronics is expected to generate 4.3 times less return on investment than Tesla. But when comparing it to its historical volatility, Methode Electronics is 1.13 times less risky than Tesla. It trades about 0.05 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 19,478 in Tesla Inc on September 3, 2024 and sell it today you would earn a total of 12,672 from holding Tesla Inc or generate 65.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. Tesla Inc
Performance |
| Timeline |
| Methode Electronics |
| Tesla Inc |
Methode Electronics and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Tesla
The main advantage of trading using opposite Methode Electronics and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.| Methode Electronics vs. Hon Hai Precision | Methode Electronics vs. Samsung SDI Co | Methode Electronics vs. Murata Manufacturing Co | Methode Electronics vs. Mitsubishi Electric |
| Tesla vs. Methode Electronics | Tesla vs. KENNAMETAL INC | Tesla vs. Nucletron Electronic Aktiengesellschaft | Tesla vs. Meiko Electronics Co |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |