Correlation Between Strategic Education and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Strategic Education 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 Strategic Education and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Education and Methode Electronics, you can compare the effects of market volatilities on Strategic Education 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 Strategic Education with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Education and Methode Electronics.
Diversification Opportunities for Strategic Education and Methode Electronics
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Strategic and Methode is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Strategic Education 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 Strategic Education 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 Strategic Education i.e., Strategic Education and Methode Electronics go up and down completely randomly.
Pair Corralation between Strategic Education and Methode Electronics
Assuming the 90 days horizon Strategic Education is expected to generate 0.54 times more return on investment than Methode Electronics. However, Strategic Education is 1.84 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 6,893 in Strategic Education on September 24, 2024 and sell it today you would earn a total of 2,207 from holding Strategic Education or generate 32.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Education vs. Methode Electronics
Performance |
| Timeline |
| Strategic Education |
| Methode Electronics |
Strategic Education and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Education and Methode Electronics
The main advantage of trading using opposite Strategic Education and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Education 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.| Strategic Education vs. IDP EDUCATION LTD | Strategic Education vs. TAL Education Group | Strategic Education vs. Grand Canyon Education | Strategic Education vs. Graham Holdings Co |
| Methode Electronics vs. Amphenol | Methode Electronics vs. Hon Hai Precision | Methode Electronics vs. Samsung SDI Co | Methode Electronics vs. Murata Manufacturing Co |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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