Correlation Between METHODE ELECTRONICS and Amazon
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and Amazon Inc, you can compare the effects of market volatilities on METHODE ELECTRONICS and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and Amazon.
Diversification Opportunities for METHODE ELECTRONICS and Amazon
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between METHODE and Amazon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and Amazon go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and Amazon
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 2.19 times more return on investment than Amazon. However, METHODE ELECTRONICS is 2.19 times more volatile than Amazon Inc. It trades about 0.27 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.16 per unit of risk. If you would invest 820.00 in METHODE ELECTRONICS on September 2, 2024 and sell it today you would earn a total of 220.00 from holding METHODE ELECTRONICS or generate 26.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
METHODE ELECTRONICS vs. Amazon Inc
Performance |
| Timeline |
| METHODE ELECTRONICS |
| Amazon Inc |
METHODE ELECTRONICS and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and Amazon
The main advantage of trading using opposite METHODE ELECTRONICS and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| METHODE ELECTRONICS vs. SIVERS SEMICONDUCTORS AB | METHODE ELECTRONICS vs. Darden Restaurants | METHODE ELECTRONICS vs. Reliance Steel Aluminum | METHODE ELECTRONICS vs. Q2M Managementberatung AG |
| Amazon vs. Richardson Electronics | Amazon vs. Mobilezone Holding AG | Amazon vs. METHODE ELECTRONICS | Amazon vs. Arrow Electronics |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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