Correlation Between METHODE ELECTRONICS and LIFE +
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and LIFE + 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 LIFE + into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and LIFE BANC SPLIT, you can compare the effects of market volatilities on METHODE ELECTRONICS and LIFE + 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 LIFE +. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and LIFE +.
Diversification Opportunities for METHODE ELECTRONICS and LIFE +
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between METHODE and LIFE is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and LIFE BANC SPLIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFE BANC SPLIT 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 LIFE +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFE BANC SPLIT has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and LIFE + go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and LIFE +
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 1.29 times more return on investment than LIFE +. However, METHODE ELECTRONICS is 1.29 times more volatile than LIFE BANC SPLIT. It trades about 0.0 of its potential returns per unit of risk. LIFE BANC SPLIT is currently generating about -0.04 per unit of risk. If you would invest 1,067 in METHODE ELECTRONICS on November 9, 2024 and sell it today you would lose (17.00) from holding METHODE ELECTRONICS or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
METHODE ELECTRONICS vs. LIFE BANC SPLIT
Performance |
| Timeline |
| METHODE ELECTRONICS |
| LIFE BANC SPLIT |
METHODE ELECTRONICS and LIFE + Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and LIFE +
The main advantage of trading using opposite METHODE ELECTRONICS and LIFE + positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, LIFE + 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 LIFE + will offset losses from the drop in LIFE +'s long position.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc |
| LIFE + vs. OFFICE DEPOT | LIFE + vs. DFS Furniture PLC | LIFE + vs. CITY OFFICE REIT | LIFE + vs. Focus Home Interactive |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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