Correlation Between METHODE ELECTRONICS and THAI BEVERAGE
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and THAI BEVERAGE 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 THAI BEVERAGE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and THAI BEVERAGE, you can compare the effects of market volatilities on METHODE ELECTRONICS and THAI BEVERAGE 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 THAI BEVERAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and THAI BEVERAGE.
Diversification Opportunities for METHODE ELECTRONICS and THAI BEVERAGE
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between METHODE and THAI is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and THAI BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THAI BEVERAGE 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 THAI BEVERAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THAI BEVERAGE has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and THAI BEVERAGE go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and THAI BEVERAGE
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 1.83 times more return on investment than THAI BEVERAGE. However, METHODE ELECTRONICS is 1.83 times more volatile than THAI BEVERAGE. It trades about 0.16 of its potential returns per unit of risk. THAI BEVERAGE is currently generating about 0.06 per unit of risk. If you would invest 870.00 in METHODE ELECTRONICS on August 28, 2024 and sell it today you would earn a total of 130.00 from holding METHODE ELECTRONICS or generate 14.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
METHODE ELECTRONICS vs. THAI BEVERAGE
Performance |
| Timeline |
| METHODE ELECTRONICS |
| THAI BEVERAGE |
METHODE ELECTRONICS and THAI BEVERAGE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and THAI BEVERAGE
The main advantage of trading using opposite METHODE ELECTRONICS and THAI BEVERAGE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, THAI BEVERAGE 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 THAI BEVERAGE will offset losses from the drop in THAI BEVERAGE's long position.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Microsoft | METHODE ELECTRONICS vs. Microsoft |
| THAI BEVERAGE vs. Apple Inc | THAI BEVERAGE vs. Apple Inc | THAI BEVERAGE vs. Microsoft | THAI BEVERAGE 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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