Correlation Between Trimble and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Trimble 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 Trimble and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trimble and Methode Electronics, you can compare the effects of market volatilities on Trimble 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 Trimble with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trimble and Methode Electronics.
Diversification Opportunities for Trimble and Methode Electronics
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Trimble and Methode is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Trimble 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 Trimble 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 Trimble i.e., Trimble and Methode Electronics go up and down completely randomly.
Pair Corralation between Trimble and Methode Electronics
Assuming the 90 days horizon Trimble is expected to generate 7.21 times less return on investment than Methode Electronics. But when comparing it to its historical volatility, Trimble is 5.01 times less risky than Methode Electronics. It trades about 0.16 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 920.00 in Methode Electronics on September 12, 2024 and sell it today you would earn a total of 270.00 from holding Methode Electronics or generate 29.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trimble vs. Methode Electronics
Performance |
| Timeline |
| Trimble |
| Methode Electronics |
Trimble and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trimble and Methode Electronics
The main advantage of trading using opposite Trimble and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trimble 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.| Trimble vs. Methode Electronics | Trimble vs. ETFS Coffee ETC | Trimble vs. Meiko Electronics Co | Trimble vs. DATAGROUP SE |
| Methode Electronics vs. Sunny Optical Technology | Methode Electronics vs. Hubbell Incorporated | Methode Electronics vs. TDK Corporation | Methode Electronics vs. Superior Plus Corp |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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