Correlation Between Patterson Companies and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Patterson Companies 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 Patterson Companies and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Patterson Companies and Methode Electronics, you can compare the effects of market volatilities on Patterson Companies 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 Patterson Companies with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson Companies and Methode Electronics.
Diversification Opportunities for Patterson Companies and Methode Electronics
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Patterson and Methode is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Patterson Companies and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Patterson Companies 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 Patterson Companies 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 Patterson Companies i.e., Patterson Companies and Methode Electronics go up and down completely randomly.
Pair Corralation between Patterson Companies and Methode Electronics
Assuming the 90 days horizon Patterson Companies is expected to generate 2.47 times less return on investment than Methode Electronics. But when comparing it to its historical volatility, Patterson Companies is 2.11 times less risky than Methode Electronics. It trades about 0.2 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 940.00 in Methode Electronics on September 13, 2024 and sell it today you would earn a total of 280.00 from holding Methode Electronics or generate 29.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Patterson Companies vs. Methode Electronics
Performance |
| Timeline |
| Patterson Companies |
| Methode Electronics |
Patterson Companies and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Patterson Companies and Methode Electronics
The main advantage of trading using opposite Patterson Companies and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson Companies 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.| Patterson Companies vs. Methode Electronics | Patterson Companies vs. THAI BEVERAGE | Patterson Companies vs. ARROW ELECTRONICS | Patterson Companies vs. Monster Beverage Corp |
| Methode Electronics vs. Sunny Optical Technology | Methode Electronics vs. Hubbell Incorporated | Methode Electronics vs. TDK Corporation | Methode Electronics vs. Superior Plus Corp |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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