Correlation Between Natural Health and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Natural Health and Methode Electronics 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 Natural Health and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Health Trends and Methode Electronics, you can compare the effects of market volatilities on Natural Health and Methode Electronics 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 Natural Health with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Health and Methode Electronics.
Diversification Opportunities for Natural Health and Methode Electronics
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Natural and Methode is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Natural Health 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 Natural Health Trends are associated (or correlated) with Methode Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methode Electronics has no effect on the direction of Natural Health i.e., Natural Health and Methode Electronics go up and down completely randomly.
Pair Corralation between Natural Health and Methode Electronics
Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the Methode Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Natural Health Trends is 2.15 times less risky than Methode Electronics. The stock trades about -0.1 of its potential returns per unit of risk. The Methode Electronics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 922.00 in Methode Electronics on September 27, 2024 and sell it today you would earn a total of 238.00 from holding Methode Electronics or generate 25.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natural Health Trends vs. Methode Electronics
Performance |
| Timeline |
| Natural Health Trends |
| Methode Electronics |
Natural Health and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Health and Methode Electronics
The main advantage of trading using opposite Natural Health and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Health position performs unexpectedly, Methode Electronics 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 Methode Electronics will offset losses from the drop in Methode Electronics' long position.| Natural Health vs. COSTCO WHOLESALE CDR | Natural Health vs. Caltagirone SpA | Natural Health vs. CosmoSteel Holdings Limited | Natural Health vs. United States Steel |
| Methode Electronics vs. CHINA EDUCATION GROUP | Methode Electronics vs. TRADELINK ELECTRON | Methode Electronics vs. Xinhua Winshare Publishing | Methode Electronics vs. TRADEGATE |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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