Correlation Between Research Frontiers and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Research Frontiers 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 Research Frontiers and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Research Frontiers Incorporated and Methode Electronics, you can compare the effects of market volatilities on Research Frontiers 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 Research Frontiers with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Research Frontiers and Methode Electronics.
Diversification Opportunities for Research Frontiers and Methode Electronics
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Research and Methode is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Research Frontiers Incorporate and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Research Frontiers 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 Research Frontiers Incorporated 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 Research Frontiers i.e., Research Frontiers and Methode Electronics go up and down completely randomly.
Pair Corralation between Research Frontiers and Methode Electronics
Given the investment horizon of 90 days Research Frontiers Incorporated is expected to under-perform the Methode Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Research Frontiers Incorporated is 1.26 times less risky than Methode Electronics. The stock trades about -0.13 of its potential returns per unit of risk. The Methode Electronics is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 923.00 in Methode Electronics on August 31, 2024 and sell it today you would earn a total of 169.00 from holding Methode Electronics or generate 18.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Research Frontiers Incorporate vs. Methode Electronics
Performance |
| Timeline |
| Research Frontiers |
| Methode Electronics |
Research Frontiers and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Research Frontiers and Methode Electronics
The main advantage of trading using opposite Research Frontiers and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Research Frontiers 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.| Research Frontiers vs. Richardson Electronics | Research Frontiers vs. Orion Energy Systems | Research Frontiers vs. RF Industries | Research Frontiers vs. Reading International |
| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. Celestica | Methode Electronics vs. CTS Corporation |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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