Correlation Between Methode Electronics and Deswell Industries
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Deswell Industries 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 Deswell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Deswell Industries, you can compare the effects of market volatilities on Methode Electronics and Deswell Industries 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 Deswell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Deswell Industries.
Diversification Opportunities for Methode Electronics and Deswell Industries
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Methode and Deswell is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries 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 Deswell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deswell Industries has no effect on the direction of Methode Electronics i.e., Methode Electronics and Deswell Industries go up and down completely randomly.
Pair Corralation between Methode Electronics and Deswell Industries
Considering the 90-day investment horizon Methode Electronics is expected to generate 2.64 times more return on investment than Deswell Industries. However, Methode Electronics is 2.64 times more volatile than Deswell Industries. It trades about 0.15 of its potential returns per unit of risk. Deswell Industries is currently generating about 0.15 per unit of risk. If you would invest 953.00 in Methode Electronics on August 28, 2024 and sell it today you would earn a total of 116.00 from holding Methode Electronics or generate 12.17% 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. Deswell Industries
Performance |
| Timeline |
| Methode Electronics |
| Deswell Industries |
Methode Electronics and Deswell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Deswell Industries
The main advantage of trading using opposite Methode Electronics and Deswell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Deswell Industries 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 Deswell Industries will offset losses from the drop in Deswell Industries' long position.| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode Electronics vs. Celestica |
| Deswell Industries vs. Ieh Corp | Deswell Industries vs. LGL Group | Deswell Industries vs. Micropac Industries | Deswell Industries vs. SigmaTron International |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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