Correlation Between PLAYTECH and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both PLAYTECH 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 PLAYTECH and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PLAYTECH and Methode Electronics, you can compare the effects of market volatilities on PLAYTECH 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 PLAYTECH with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYTECH and Methode Electronics.
Diversification Opportunities for PLAYTECH and Methode Electronics
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between PLAYTECH and Methode is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding PLAYTECH and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and PLAYTECH 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 PLAYTECH 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 PLAYTECH i.e., PLAYTECH and Methode Electronics go up and down completely randomly.
Pair Corralation between PLAYTECH and Methode Electronics
Assuming the 90 days trading horizon PLAYTECH is expected to generate 0.55 times more return on investment than Methode Electronics. However, PLAYTECH is 1.8 times less risky than Methode Electronics. It trades about 0.04 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.04 per unit of risk. If you would invest 640.00 in PLAYTECH on October 19, 2024 and sell it today you would earn a total of 224.00 from holding PLAYTECH or generate 35.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PLAYTECH vs. Methode Electronics
Performance |
| Timeline |
| PLAYTECH |
| Methode Electronics |
PLAYTECH and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PLAYTECH and Methode Electronics
The main advantage of trading using opposite PLAYTECH and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLAYTECH 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 PLAYTECH 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.| Methode Electronics vs. GALENA MINING LTD | Methode Electronics vs. CNVISION MEDIA | Methode Electronics vs. Western Copper and | Methode Electronics vs. Universal Entertainment |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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