Correlation Between METHODE ELECTRONICS and DISTRICT METALS
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and DISTRICT METALS 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 DISTRICT METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and DISTRICT METALS, you can compare the effects of market volatilities on METHODE ELECTRONICS and DISTRICT METALS 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 DISTRICT METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and DISTRICT METALS.
Diversification Opportunities for METHODE ELECTRONICS and DISTRICT METALS
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between METHODE and DISTRICT is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and DISTRICT METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISTRICT METALS 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 DISTRICT METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISTRICT METALS has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and DISTRICT METALS go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and DISTRICT METALS
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 1.64 times less return on investment than DISTRICT METALS. In addition to that, METHODE ELECTRONICS is 1.02 times more volatile than DISTRICT METALS. It trades about 0.07 of its total potential returns per unit of risk. DISTRICT METALS is currently generating about 0.12 per unit of volatility. If you would invest 17.00 in DISTRICT METALS on September 20, 2024 and sell it today you would earn a total of 6.00 from holding DISTRICT METALS or generate 35.29% 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. DISTRICT METALS
Performance |
| Timeline |
| METHODE ELECTRONICS |
| DISTRICT METALS |
METHODE ELECTRONICS and DISTRICT METALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and DISTRICT METALS
The main advantage of trading using opposite METHODE ELECTRONICS and DISTRICT METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, DISTRICT METALS 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 DISTRICT METALS will offset losses from the drop in DISTRICT METALS's long position.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Microsoft |
| DISTRICT METALS vs. American Lithium Corp | DISTRICT METALS vs. ADRIATIC METALS LS 013355 | DISTRICT METALS vs. Superior Plus Corp | DISTRICT METALS vs. SIVERS SEMICONDUCTORS AB |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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