Correlation Between Methode Electronics and Benchmark Electronics
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Benchmark 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 Benchmark 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 Benchmark Electronics, you can compare the effects of market volatilities on Methode Electronics and Benchmark 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 Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Benchmark Electronics.
Diversification Opportunities for Methode Electronics and Benchmark Electronics
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Methode and Benchmark is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark 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 Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Methode Electronics i.e., Methode Electronics and Benchmark Electronics go up and down completely randomly.
Pair Corralation between Methode Electronics and Benchmark Electronics
Considering the 90-day investment horizon Methode Electronics is expected to under-perform the Benchmark Electronics. In addition to that, Methode Electronics is 1.32 times more volatile than Benchmark Electronics. It trades about -0.02 of its total potential returns per unit of risk. Benchmark Electronics is currently generating about 0.16 per unit of volatility. If you would invest 4,295 in Benchmark Electronics on August 24, 2024 and sell it today you would earn a total of 470.00 from holding Benchmark Electronics or generate 10.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. Benchmark Electronics
Performance |
| Timeline |
| Methode Electronics |
| Benchmark Electronics |
Methode Electronics and Benchmark Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Benchmark Electronics
The main advantage of trading using opposite Methode Electronics and Benchmark Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Benchmark 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 Benchmark Electronics will offset losses from the drop in Benchmark Electronics' long position.| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode Electronics vs. Celestica |
| Benchmark Electronics vs. Plexus Corp | Benchmark Electronics vs. Jabil Circuit | Benchmark Electronics vs. Rogers | Benchmark Electronics vs. Sanmina |
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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