Correlation Between METHODE ELECTRONICS and Lendlease
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and Lendlease 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 Lendlease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and Lendlease Group, you can compare the effects of market volatilities on METHODE ELECTRONICS and Lendlease 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 Lendlease. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and Lendlease.
Diversification Opportunities for METHODE ELECTRONICS and Lendlease
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between METHODE and Lendlease is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease 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 Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and Lendlease go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and Lendlease
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 3.15 times more return on investment than Lendlease. However, METHODE ELECTRONICS is 3.15 times more volatile than Lendlease Group. It trades about 0.11 of its potential returns per unit of risk. Lendlease Group is currently generating about -0.03 per unit of risk. If you would invest 895.00 in METHODE ELECTRONICS on August 25, 2024 and sell it today you would earn a total of 80.00 from holding METHODE ELECTRONICS or generate 8.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
METHODE ELECTRONICS vs. Lendlease Group
Performance |
| Timeline |
| METHODE ELECTRONICS |
| Lendlease Group |
METHODE ELECTRONICS and Lendlease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and Lendlease
The main advantage of trading using opposite METHODE ELECTRONICS and Lendlease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, Lendlease 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 Lendlease will offset losses from the drop in Lendlease's long position.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc |
| Lendlease vs. Big 5 Sporting | Lendlease vs. Electronic Arts | Lendlease vs. Samsung Electronics Co | Lendlease vs. ALERION CLEANPOWER |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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