Correlation Between Methode Electronics and Hon Hai
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and Hon Hai 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 Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and Hon Hai Precision, you can compare the effects of market volatilities on Methode Electronics and Hon Hai 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 Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and Hon Hai.
Diversification Opportunities for Methode Electronics and Hon Hai
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Methode and Hon is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision 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 Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of Methode Electronics i.e., Methode Electronics and Hon Hai go up and down completely randomly.
Pair Corralation between Methode Electronics and Hon Hai
Considering the 90-day investment horizon Methode Electronics is expected to generate 1.04 times less return on investment than Hon Hai. In addition to that, Methode Electronics is 2.03 times more volatile than Hon Hai Precision. It trades about 0.03 of its total potential returns per unit of risk. Hon Hai Precision is currently generating about 0.06 per unit of volatility. If you would invest 1,027 in Hon Hai Precision on September 2, 2024 and sell it today you would earn a total of 194.00 from holding Hon Hai Precision or generate 18.89% 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. Hon Hai Precision
Performance |
| Timeline |
| Methode Electronics |
| Hon Hai Precision |
Methode Electronics and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and Hon Hai
The main advantage of trading using opposite Methode Electronics and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Hon Hai 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 Hon Hai will offset losses from the drop in Hon Hai's long position.| Methode Electronics vs. Knowles Cor | Methode Electronics vs. Ubiquiti Networks | Methode Electronics vs. AmpliTech Group | Methode Electronics vs. Viavi Solutions |
| Hon Hai vs. AT S Austria | Hon Hai vs. alpha En | Hon Hai vs. Alps Electric Co | Hon Hai vs. Bitmine Immersion Technologies |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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