Correlation Between CapitaLand Investment and Methode Electronics

Can any of the company-specific risk be diversified away by investing in both CapitaLand Investment 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 CapitaLand Investment and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CapitaLand Investment Limited and Methode Electronics, you can compare the effects of market volatilities on CapitaLand Investment 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 CapitaLand Investment with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CapitaLand Investment and Methode Electronics.

Diversification Opportunities for CapitaLand Investment and Methode Electronics

-0.32

Correlation Coefficient

CapitaLand Investment  Methode Electronics

Very good diversification

The 3 months correlation between CapitaLand and Methode is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CapitaLand Investment Limited and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and CapitaLand Investment 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 CapitaLand Investment 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 CapitaLand Investment i.e., CapitaLand Investment and Methode Electronics go up and down completely randomly.

Pair Corralation between CapitaLand Investment and Methode Electronics

Assuming the 90 days horizon CapitaLand Investment Limited is expected to under-perform the Methode Electronics. But the stock apears to be less risky and, when comparing its historical volatility, CapitaLand Investment Limited is 4.83 times less risky than Methode Electronics. The stock trades about -0.28 of its potential returns per unit of risk. The Methode Electronics is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  850.00  in Methode Electronics on September 21, 2024 and sell it today you would earn a total of  350.00  from holding Methode Electronics or generate 41.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CapitaLand Investment Limited  vs.  Methode Electronics

CapitaLand Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Methode Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Methode Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Methode Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CapitaLand Investment and Methode Electronics

The main advantage of trading using opposite CapitaLand Investment and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CapitaLand Investment 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 CapitaLand Investment Limited 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.