Correlation Between Methode Electronics and CTS
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and CTS 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 CTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and CTS Corporation, you can compare the effects of market volatilities on Methode Electronics and CTS 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 CTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and CTS.
Diversification Opportunities for Methode Electronics and CTS
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Methode and CTS is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and CTS Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Corporation 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 CTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Corporation has no effect on the direction of Methode Electronics i.e., Methode Electronics and CTS go up and down completely randomly.
Pair Corralation between Methode Electronics and CTS
Considering the 90-day investment horizon Methode Electronics is expected to under-perform the CTS. In addition to that, Methode Electronics is 1.33 times more volatile than CTS Corporation. It trades about -0.02 of its total potential returns per unit of risk. CTS Corporation is currently generating about 0.19 per unit of volatility. If you would invest 4,701 in CTS Corporation on August 24, 2024 and sell it today you would earn a total of 617.00 from holding CTS Corporation or generate 13.12% 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. CTS Corp.
Performance |
| Timeline |
| Methode Electronics |
| CTS Corporation |
Methode Electronics and CTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and CTS
The main advantage of trading using opposite Methode Electronics and CTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, CTS 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 CTS will offset losses from the drop in CTS's long position.| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode Electronics vs. Celestica |
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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