Correlation Between ScanSource and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both ScanSource 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 ScanSource and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and Methode Electronics, you can compare the effects of market volatilities on ScanSource 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 ScanSource with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and Methode Electronics.
Diversification Opportunities for ScanSource and Methode Electronics
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ScanSource and Methode is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and ScanSource 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 ScanSource 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 ScanSource i.e., ScanSource and Methode Electronics go up and down completely randomly.
Pair Corralation between ScanSource and Methode Electronics
Assuming the 90 days horizon ScanSource is expected to generate 6.0 times less return on investment than Methode Electronics. But when comparing it to its historical volatility, ScanSource is 1.47 times less risky than Methode Electronics. It trades about 0.02 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 912.00 in Methode Electronics on August 30, 2024 and sell it today you would earn a total of 118.00 from holding Methode Electronics or generate 12.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ScanSource vs. Methode Electronics
Performance |
| Timeline |
| ScanSource |
| Methode Electronics |
ScanSource and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ScanSource and Methode Electronics
The main advantage of trading using opposite ScanSource and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource 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.| ScanSource vs. Boyd Gaming | ScanSource vs. NXP Semiconductors NV | ScanSource vs. Media and Games | ScanSource vs. ANGLER GAMING PLC |
| Methode Electronics vs. Hochschild Mining plc | Methode Electronics vs. OURGAME INTHOLDL 00005 | Methode Electronics vs. MagnaChip Semiconductor Corp | Methode Electronics vs. CI GAMES SA |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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