Correlation Between Sunny Optical and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Sunny Optical 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 Sunny Optical and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunny Optical Technology and Methode Electronics, you can compare the effects of market volatilities on Sunny Optical 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 Sunny Optical with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Optical and Methode Electronics.
Diversification Opportunities for Sunny Optical and Methode Electronics
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sunny and Methode is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical Technology and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Sunny Optical 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 Sunny Optical Technology 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 Sunny Optical i.e., Sunny Optical and Methode Electronics go up and down completely randomly.
Pair Corralation between Sunny Optical and Methode Electronics
Assuming the 90 days horizon Sunny Optical Technology is expected to generate 0.89 times more return on investment than Methode Electronics. However, Sunny Optical Technology is 1.12 times less risky than Methode Electronics. It trades about 0.23 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.08 per unit of risk. If you would invest 578.00 in Sunny Optical Technology on August 29, 2024 and sell it today you would earn a total of 124.00 from holding Sunny Optical Technology or generate 21.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunny Optical Technology vs. Methode Electronics
Performance |
| Timeline |
| Sunny Optical Technology |
| Methode Electronics |
Sunny Optical and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunny Optical and Methode Electronics
The main advantage of trading using opposite Sunny Optical and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Optical 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 Sunny Optical Technology 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. ALGOMA STEEL GROUP | Methode Electronics vs. LEGACY IRON ORE | Methode Electronics vs. NEWELL RUBBERMAID | Methode Electronics vs. Sumitomo Rubber Industries |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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