Correlation Between NORTHEAST UTILITIES and Methode Electronics

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES 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 NORTHEAST UTILITIES and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Methode Electronics, you can compare the effects of market volatilities on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Methode Electronics.

Diversification Opportunities for NORTHEAST UTILITIES and Methode Electronics

-0.66
  Correlation Coefficient

Excellent diversification

The 3 months correlation between NORTHEAST and Methode is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Methode Electronics go up and down completely randomly.

Pair Corralation between NORTHEAST UTILITIES and Methode Electronics

Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.42 times more return on investment than Methode Electronics. However, NORTHEAST UTILITIES is 2.38 times less risky than Methode Electronics. It trades about 0.09 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.01 per unit of risk. If you would invest  5,400  in NORTHEAST UTILITIES on November 5, 2024 and sell it today you would earn a total of  150.00  from holding NORTHEAST UTILITIES or generate 2.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

NORTHEAST UTILITIES  vs.  Methode Electronics

 Performance 
       Timeline  
NORTHEAST UTILITIES 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NORTHEAST UTILITIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, NORTHEAST UTILITIES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
Methode Electronics 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Methode Electronics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Methode Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

NORTHEAST UTILITIES and Methode Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NORTHEAST UTILITIES and Methode Electronics

The main advantage of trading using opposite NORTHEAST UTILITIES and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES 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.
The idea behind NORTHEAST UTILITIES and Methode Electronics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

Other Complementary Tools

Global Correlations
Find global opportunities by holding instruments from different markets
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Risk-Return Analysis
View associations between returns expected from investment and the risk you assume