Correlation Between Methode Electronics and Eltek
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Eltek 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 Eltek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Eltek, you can compare the effects of market volatilities on Methode Electronics and Eltek 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 Eltek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Eltek.
Diversification Opportunities for Methode Electronics and Eltek
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Methode and Eltek is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eltek 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 Eltek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eltek has no effect on the direction of Methode Electronics i.e., Methode Electronics and Eltek go up and down completely randomly.
Pair Corralation between Methode Electronics and Eltek
Considering the 90-day investment horizon Methode Electronics is expected to under-perform the Eltek. In addition to that, Methode Electronics is 1.71 times more volatile than Eltek. It trades about -0.04 of its total potential returns per unit of risk. Eltek is currently generating about -0.02 per unit of volatility. If you would invest 1,398 in Eltek on August 27, 2024 and sell it today you would lose (293.00) from holding Eltek or give up 20.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. Eltek
Performance |
| Timeline |
| Methode Electronics |
| Eltek |
Methode Electronics and Eltek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Eltek
The main advantage of trading using opposite Methode Electronics and Eltek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Eltek 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 Eltek will offset losses from the drop in Eltek's long position.| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode Electronics vs. Celestica |
| Eltek vs. Methode Electronics | Eltek vs. OSI Systems | Eltek vs. Bel Fuse A | Eltek vs. Richardson Electronics |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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