Correlation Between METHODE ELECTRONICS and Ultra Clean
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and Ultra Clean 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 Ultra Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and Ultra Clean Holdings, you can compare the effects of market volatilities on METHODE ELECTRONICS and Ultra Clean 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 Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and Ultra Clean.
Diversification Opportunities for METHODE ELECTRONICS and Ultra Clean
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between METHODE and Ultra is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings 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 Ultra Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Clean Holdings has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and Ultra Clean go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and Ultra Clean
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 0.77 times more return on investment than Ultra Clean. However, METHODE ELECTRONICS is 1.3 times less risky than Ultra Clean. It trades about 0.02 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about -0.11 per unit of risk. If you would invest 1,026 in METHODE ELECTRONICS on August 30, 2024 and sell it today you would earn a total of 4.00 from holding METHODE ELECTRONICS or generate 0.39% 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. Ultra Clean Holdings
Performance |
| Timeline |
| METHODE ELECTRONICS |
| Ultra Clean Holdings |
METHODE ELECTRONICS and Ultra Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and Ultra Clean
The main advantage of trading using opposite METHODE ELECTRONICS and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, Ultra Clean 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 Ultra Clean will offset losses from the drop in Ultra Clean'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 |
| Ultra Clean vs. STMICROELECTRONICS | Ultra Clean vs. Renesas Electronics | Ultra Clean vs. Ryanair Holdings plc | Ultra Clean vs. Enter Air SA |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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