Correlation Between Methode Electronics and VULCAN MATERIALS
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and VULCAN MATERIALS 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 VULCAN MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and VULCAN MATERIALS, you can compare the effects of market volatilities on Methode Electronics and VULCAN MATERIALS 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 VULCAN MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and VULCAN MATERIALS.
Diversification Opportunities for Methode Electronics and VULCAN MATERIALS
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Methode and VULCAN is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of Methode Electronics i.e., Methode Electronics and VULCAN MATERIALS go up and down completely randomly.
Pair Corralation between Methode Electronics and VULCAN MATERIALS
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the VULCAN MATERIALS. In addition to that, Methode Electronics is 2.1 times more volatile than VULCAN MATERIALS. It trades about -0.31 of its total potential returns per unit of risk. VULCAN MATERIALS is currently generating about -0.25 per unit of volatility. If you would invest 26,200 in VULCAN MATERIALS on October 16, 2024 and sell it today you would lose (1,400) from holding VULCAN MATERIALS or give up 5.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.12% |
| Values | Daily Returns |
Methode Electronics vs. VULCAN MATERIALS
Performance |
| Timeline |
| Methode Electronics |
| VULCAN MATERIALS |
Methode Electronics and VULCAN MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and VULCAN MATERIALS
The main advantage of trading using opposite Methode Electronics and VULCAN MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, VULCAN MATERIALS 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 VULCAN MATERIALS will offset losses from the drop in VULCAN MATERIALS's long position.| Methode Electronics vs. CVW CLEANTECH INC | Methode Electronics vs. ARROW ELECTRONICS | Methode Electronics vs. Nanjing Panda Electronics | Methode Electronics vs. Meiko Electronics Co |
| VULCAN MATERIALS vs. AOYAMA TRADING | VULCAN MATERIALS vs. CarsalesCom | VULCAN MATERIALS vs. CDL INVESTMENT | VULCAN MATERIALS vs. Japan Asia Investment |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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