Correlation Between Methode Electronics and Warner Music
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Warner Music 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 Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Warner Music Group, you can compare the effects of market volatilities on Methode Electronics and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Warner Music.
Diversification Opportunities for Methode Electronics and Warner Music
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Methode and Warner is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Methode Electronics i.e., Methode Electronics and Warner Music go up and down completely randomly.
Pair Corralation between Methode Electronics and Warner Music
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the Warner Music. In addition to that, Methode Electronics is 1.92 times more volatile than Warner Music Group. It trades about -0.06 of its total potential returns per unit of risk. Warner Music Group is currently generating about 0.0 per unit of volatility. If you would invest 3,343 in Warner Music Group on August 28, 2024 and sell it today you would lose (390.00) from holding Warner Music Group or give up 11.67% 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. Warner Music Group
Performance |
| Timeline |
| Methode Electronics |
| Warner Music Group |
Methode Electronics and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Warner Music
The main advantage of trading using opposite Methode Electronics and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Methode Electronics vs. ALGOMA STEEL GROUP | Methode Electronics vs. LEGACY IRON ORE | Methode Electronics vs. NEWELL RUBBERMAID | Methode Electronics vs. Sumitomo Rubber Industries |
| Warner Music vs. The Walt Disney | Warner Music vs. Superior Plus Corp | Warner Music vs. NMI Holdings | Warner Music vs. Origin Agritech |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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