Correlation Between METHODE ELECTRONICS and KIMBALL ELECTRONICS
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and KIMBALL ELECTRONICS, you can compare the effects of market volatilities on METHODE ELECTRONICS and KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and KIMBALL ELECTRONICS.
Diversification Opportunities for METHODE ELECTRONICS and KIMBALL ELECTRONICS
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between METHODE and KIMBALL is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and KIMBALL ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMBALL ELECTRONICS has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and KIMBALL ELECTRONICS go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and KIMBALL ELECTRONICS
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 1.74 times less return on investment than KIMBALL ELECTRONICS. In addition to that, METHODE ELECTRONICS is 1.06 times more volatile than KIMBALL ELECTRONICS. It trades about 0.07 of its total potential returns per unit of risk. KIMBALL ELECTRONICS is currently generating about 0.12 per unit of volatility. If you would invest 1,610 in KIMBALL ELECTRONICS on August 24, 2024 and sell it today you would earn a total of 170.00 from holding KIMBALL ELECTRONICS or generate 10.56% 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. KIMBALL ELECTRONICS
Performance |
| Timeline |
| METHODE ELECTRONICS |
| KIMBALL ELECTRONICS |
METHODE ELECTRONICS and KIMBALL ELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and KIMBALL ELECTRONICS
The main advantage of trading using opposite METHODE ELECTRONICS and KIMBALL ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS will offset losses from the drop in KIMBALL ELECTRONICS's long position.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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