Correlation Between Methode Electronics and Dolby Laboratories
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Dolby Laboratories 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 Dolby Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Dolby Laboratories, you can compare the effects of market volatilities on Methode Electronics and Dolby Laboratories 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 Dolby Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Dolby Laboratories.
Diversification Opportunities for Methode Electronics and Dolby Laboratories
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Methode and Dolby is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Dolby Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolby Laboratories 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 Dolby Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolby Laboratories has no effect on the direction of Methode Electronics i.e., Methode Electronics and Dolby Laboratories go up and down completely randomly.
Pair Corralation between Methode Electronics and Dolby Laboratories
Considering the 90-day investment horizon Methode Electronics is expected to generate 1.12 times more return on investment than Dolby Laboratories. However, Methode Electronics is 1.12 times more volatile than Dolby Laboratories. It trades about 0.21 of its potential returns per unit of risk. Dolby Laboratories is currently generating about 0.1 per unit of risk. If you would invest 923.00 in Methode Electronics on August 31, 2024 and sell it today you would earn a total of 169.00 from holding Methode Electronics or generate 18.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Methode Electronics vs. Dolby Laboratories
Performance |
| Timeline |
| Methode Electronics |
| Dolby Laboratories |
Methode Electronics and Dolby Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Dolby Laboratories
The main advantage of trading using opposite Methode Electronics and Dolby Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Dolby Laboratories 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 Dolby Laboratories will offset losses from the drop in Dolby Laboratories' long position.| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. Celestica | Methode Electronics vs. CTS Corporation |
| Dolby Laboratories vs. Maximus | Dolby Laboratories vs. Network 1 Technologies | Dolby Laboratories vs. First Advantage Corp | Dolby Laboratories vs. BrightView Holdings |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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