Correlation Between METHODE ELECTRONICS and UMC Electronics
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS and UMC Electronics 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 UMC Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and UMC Electronics Co, you can compare the effects of market volatilities on METHODE ELECTRONICS and UMC Electronics 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 UMC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and UMC Electronics.
Diversification Opportunities for METHODE ELECTRONICS and UMC Electronics
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between METHODE and UMC is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics 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 UMC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMC Electronics has no effect on the direction of METHODE ELECTRONICS i.e., METHODE ELECTRONICS and UMC Electronics go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and UMC Electronics
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to generate 1.98 times more return on investment than UMC Electronics. However, METHODE ELECTRONICS is 1.98 times more volatile than UMC Electronics Co. It trades about 0.07 of its potential returns per unit of risk. UMC Electronics Co is currently generating about -0.15 per unit of risk. If you would invest 930.00 in METHODE ELECTRONICS on August 24, 2024 and sell it today you would earn a total of 45.00 from holding METHODE ELECTRONICS or generate 4.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
METHODE ELECTRONICS vs. UMC Electronics Co
Performance |
| Timeline |
| METHODE ELECTRONICS |
| UMC Electronics |
METHODE ELECTRONICS and UMC Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and UMC Electronics
The main advantage of trading using opposite METHODE ELECTRONICS and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS position performs unexpectedly, UMC Electronics 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 UMC Electronics will offset losses from the drop in UMC Electronics' long position.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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