Correlation Between Methode Electronics and TE Connectivity
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and TE Connectivity 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 TE Connectivity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and TE Connectivity, you can compare the effects of market volatilities on Methode Electronics and TE Connectivity 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 TE Connectivity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and TE Connectivity.
Diversification Opportunities for Methode Electronics and TE Connectivity
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Methode and TEL is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and TE Connectivity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TE Connectivity 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 TE Connectivity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TE Connectivity has no effect on the direction of Methode Electronics i.e., Methode Electronics and TE Connectivity go up and down completely randomly.
Pair Corralation between Methode Electronics and TE Connectivity
Considering the 90-day investment horizon Methode Electronics is expected to under-perform the TE Connectivity. In addition to that, Methode Electronics is 2.72 times more volatile than TE Connectivity. It trades about -0.03 of its total potential returns per unit of risk. TE Connectivity is currently generating about 0.02 per unit of volatility. If you would invest 15,034 in TE Connectivity on August 30, 2024 and sell it today you would earn a total of 81.00 from holding TE Connectivity or generate 0.54% 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. TE Connectivity
Performance |
| Timeline |
| Methode Electronics |
| TE Connectivity |
Methode Electronics and TE Connectivity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and TE Connectivity
The main advantage of trading using opposite Methode Electronics and TE Connectivity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, TE Connectivity 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 TE Connectivity will offset losses from the drop in TE Connectivity's long position.| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode Electronics vs. Celestica |
| TE Connectivity vs. Littelfuse | TE Connectivity vs. Fabrinet | TE Connectivity vs. Jabil Circuit | TE Connectivity vs. Sanmina |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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