Correlation Between THAI BEVERAGE and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both THAI BEVERAGE 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 THAI BEVERAGE and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THAI BEVERAGE and Methode Electronics, you can compare the effects of market volatilities on THAI BEVERAGE 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 THAI BEVERAGE with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of THAI BEVERAGE and Methode Electronics.
Diversification Opportunities for THAI BEVERAGE and Methode Electronics
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between THAI and Methode is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and THAI BEVERAGE 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 THAI BEVERAGE 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 THAI BEVERAGE i.e., THAI BEVERAGE and Methode Electronics go up and down completely randomly.
Pair Corralation between THAI BEVERAGE and Methode Electronics
Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 1.25 times more return on investment than Methode Electronics. However, THAI BEVERAGE is 1.25 times more volatile than Methode Electronics. It trades about 0.05 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.05 per unit of risk. If you would invest 16.00 in THAI BEVERAGE on October 16, 2024 and sell it today you would earn a total of 20.00 from holding THAI BEVERAGE or generate 125.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
THAI BEVERAGE vs. Methode Electronics
Performance |
| Timeline |
| THAI BEVERAGE |
| Methode Electronics |
THAI BEVERAGE and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THAI BEVERAGE and Methode Electronics
The main advantage of trading using opposite THAI BEVERAGE and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THAI BEVERAGE 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.| THAI BEVERAGE vs. TRADEDOUBLER AB SK | THAI BEVERAGE vs. Ares Management Corp | THAI BEVERAGE vs. CARSALESCOM | THAI BEVERAGE vs. FLOW TRADERS LTD |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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