Correlation Between SINGAPORE AIRLINES and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both SINGAPORE AIRLINES 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 SINGAPORE AIRLINES and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SINGAPORE AIRLINES and Methode Electronics, you can compare the effects of market volatilities on SINGAPORE AIRLINES 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 SINGAPORE AIRLINES with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of SINGAPORE AIRLINES and Methode Electronics.
Diversification Opportunities for SINGAPORE AIRLINES and Methode Electronics
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SINGAPORE and Methode is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SINGAPORE AIRLINES and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and SINGAPORE AIRLINES 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 SINGAPORE AIRLINES 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 SINGAPORE AIRLINES i.e., SINGAPORE AIRLINES and Methode Electronics go up and down completely randomly.
Pair Corralation between SINGAPORE AIRLINES and Methode Electronics
Assuming the 90 days trading horizon SINGAPORE AIRLINES is expected to generate 27.08 times less return on investment than Methode Electronics. But when comparing it to its historical volatility, SINGAPORE AIRLINES is 3.74 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 0.26 of returns per unit of risk over similar time horizon. If you would invest 815.00 in Methode Electronics on September 3, 2024 and sell it today you would earn a total of 180.00 from holding Methode Electronics or generate 22.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SINGAPORE AIRLINES vs. Methode Electronics
Performance |
| Timeline |
| SINGAPORE AIRLINES |
| Methode Electronics |
SINGAPORE AIRLINES and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SINGAPORE AIRLINES and Methode Electronics
The main advantage of trading using opposite SINGAPORE AIRLINES and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SINGAPORE AIRLINES 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.| SINGAPORE AIRLINES vs. REVO INSURANCE SPA | SINGAPORE AIRLINES vs. ALBIS LEASING AG | SINGAPORE AIRLINES vs. Evolution Mining Limited | SINGAPORE AIRLINES vs. PT Bank Maybank |
| Methode Electronics vs. Hon Hai Precision | Methode Electronics vs. Samsung SDI Co | Methode Electronics vs. Murata Manufacturing Co | Methode Electronics vs. Mitsubishi Electric |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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