Correlation Between METHODE ELECTRONICS and NH HOTEL
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and NH HOTEL 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 NH HOTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and NH HOTEL GROUP, you can compare the effects of market volatilities on METHODE ELECTRONICS and NH HOTEL 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 NH HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and NH HOTEL.
Diversification Opportunities for METHODE ELECTRONICS and NH HOTEL
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between METHODE and NH5 is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and NH HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH HOTEL 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 NH HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH HOTEL GROUP has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and NH HOTEL go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and NH HOTEL
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to under-perform the NH HOTEL. In addition to that, METHODE ELECTRONICS is 1.24 times more volatile than NH HOTEL GROUP. It trades about -0.05 of its total potential returns per unit of risk. NH HOTEL GROUP is currently generating about 0.04 per unit of volatility. If you would invest 292.00 in NH HOTEL GROUP on August 28, 2024 and sell it today you would earn a total of 114.00 from holding NH HOTEL GROUP or generate 39.04% 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. NH HOTEL GROUP
Performance |
| Timeline |
| METHODE ELECTRONICS |
| NH HOTEL GROUP |
METHODE ELECTRONICS and NH HOTEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and NH HOTEL
The main advantage of trading using opposite METHODE ELECTRONICS and NH HOTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, NH HOTEL 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 NH HOTEL will offset losses from the drop in NH HOTEL's long position.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Microsoft | METHODE ELECTRONICS vs. Microsoft |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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