Correlation Between Methode Electronics and Bel Fuse
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Bel Fuse 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 Bel Fuse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Bel Fuse B, you can compare the effects of market volatilities on Methode Electronics and Bel Fuse 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 Bel Fuse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Bel Fuse.
Diversification Opportunities for Methode Electronics and Bel Fuse
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Methode and Bel is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Bel Fuse B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bel Fuse B 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 Bel Fuse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bel Fuse B has no effect on the direction of Methode Electronics i.e., Methode Electronics and Bel Fuse go up and down completely randomly.
Pair Corralation between Methode Electronics and Bel Fuse
Considering the 90-day investment horizon Methode Electronics is expected to generate 1.78 times more return on investment than Bel Fuse. However, Methode Electronics is 1.78 times more volatile than Bel Fuse B. It trades about -0.04 of its potential returns per unit of risk. Bel Fuse B is currently generating about -0.13 per unit of risk. If you would invest 1,225 in Methode Electronics on October 20, 2024 and sell it today you would lose (39.00) from holding Methode Electronics or give up 3.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. Bel Fuse B
Performance |
| Timeline |
| Methode Electronics |
| Bel Fuse B |
Methode Electronics and Bel Fuse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Bel Fuse
The main advantage of trading using opposite Methode Electronics and Bel Fuse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Bel Fuse 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 Bel Fuse will offset losses from the drop in Bel Fuse's long position.| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode Electronics vs. Celestica |
| Bel Fuse vs. Benchmark Electronics | Bel Fuse vs. Methode Electronics | Bel Fuse vs. Richardson Electronics | Bel Fuse vs. Plexus Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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