Correlation Between Whitehaven Coal and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Whitehaven Coal 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 Whitehaven Coal and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Whitehaven Coal Limited and Methode Electronics, you can compare the effects of market volatilities on Whitehaven Coal 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 Whitehaven Coal with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whitehaven Coal and Methode Electronics.
Diversification Opportunities for Whitehaven Coal and Methode Electronics
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Whitehaven and Methode is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Whitehaven Coal Limited and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Whitehaven Coal 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 Whitehaven Coal Limited 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 Whitehaven Coal i.e., Whitehaven Coal and Methode Electronics go up and down completely randomly.
Pair Corralation between Whitehaven Coal and Methode Electronics
Assuming the 90 days horizon Whitehaven Coal Limited is expected to generate 0.6 times more return on investment than Methode Electronics. However, Whitehaven Coal Limited is 1.66 times less risky than Methode Electronics. It trades about 0.0 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.05 per unit of risk. If you would invest 418.00 in Whitehaven Coal Limited on October 25, 2024 and sell it today you would lose (43.00) from holding Whitehaven Coal Limited or give up 10.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Whitehaven Coal Limited vs. Methode Electronics
Performance |
| Timeline |
| Whitehaven Coal |
| Methode Electronics |
Whitehaven Coal and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Whitehaven Coal and Methode Electronics
The main advantage of trading using opposite Whitehaven Coal and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whitehaven Coal 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.| Whitehaven Coal vs. LG Display Co | Whitehaven Coal vs. Constellation Software | Whitehaven Coal vs. CyberArk Software | Whitehaven Coal vs. Playtech plc |
| Methode Electronics vs. Tradeweb Markets | Methode Electronics vs. IDP EDUCATION LTD | Methode Electronics vs. EMBARK EDUCATION LTD | Methode Electronics vs. FAST RETAIL ADR |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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