Correlation Between Methode Electronics and SigmaTron International
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and SigmaTron International 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 SigmaTron International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and SigmaTron International, you can compare the effects of market volatilities on Methode Electronics and SigmaTron International 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 SigmaTron International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and SigmaTron International.
Diversification Opportunities for Methode Electronics and SigmaTron International
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Methode and SigmaTron is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and SigmaTron International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SigmaTron International 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 SigmaTron International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SigmaTron International has no effect on the direction of Methode Electronics i.e., Methode Electronics and SigmaTron International go up and down completely randomly.
Pair Corralation between Methode Electronics and SigmaTron International
Considering the 90-day investment horizon Methode Electronics is expected to generate 1.35 times more return on investment than SigmaTron International. However, Methode Electronics is 1.35 times more volatile than SigmaTron International. It trades about 0.15 of its potential returns per unit of risk. SigmaTron International is currently generating about -0.07 per unit of risk. If you would invest 953.00 in Methode Electronics on August 27, 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. SigmaTron International
Performance |
| Timeline |
| Methode Electronics |
| SigmaTron International |
Methode Electronics and SigmaTron International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and SigmaTron International
The main advantage of trading using opposite Methode Electronics and SigmaTron International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, SigmaTron International 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 SigmaTron International will offset losses from the drop in SigmaTron International's long position.| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode Electronics vs. Celestica |
| SigmaTron International vs. Integrated Media Technology | SigmaTron International vs. Data IO | SigmaTron International vs. Research Frontiers Incorporated | SigmaTron International vs. Maris Tech |
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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