Correlation Between METHODE ELECTRONICS and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and Norwegian Air 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 Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and Norwegian Air Shuttle, you can compare the effects of market volatilities on METHODE ELECTRONICS and Norwegian Air 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 Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and Norwegian Air.
Diversification Opportunities for METHODE ELECTRONICS and Norwegian Air
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between METHODE and Norwegian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle 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 Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and Norwegian Air go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and Norwegian Air
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 1.08 times more return on investment than Norwegian Air. However, METHODE ELECTRONICS is 1.08 times more volatile than Norwegian Air Shuttle. It trades about 0.06 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.03 per unit of risk. If you would invest 902.00 in METHODE ELECTRONICS on August 29, 2024 and sell it today you would earn a total of 98.00 from holding METHODE ELECTRONICS or generate 10.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
METHODE ELECTRONICS vs. Norwegian Air Shuttle
Performance |
| Timeline |
| METHODE ELECTRONICS |
| Norwegian Air Shuttle |
METHODE ELECTRONICS and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and Norwegian Air
The main advantage of trading using opposite METHODE ELECTRONICS and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, Norwegian Air 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 Norwegian Air will offset losses from the drop in Norwegian Air's long position.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Superior Plus Corp | METHODE ELECTRONICS vs. SIVERS SEMICONDUCTORS AB |
| Norwegian Air vs. Aena SME SA | Norwegian Air vs. Superior Plus Corp | Norwegian Air vs. NMI Holdings | Norwegian Air 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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