Correlation Between AT S and Methode Electronics

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

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

Diversification Opportunities for AT S and Methode Electronics

0.43

Correlation Coefficient

AT S  Methode Electronics

Very weak diversification

The 3 months correlation between ASAAF and Methode is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AT S Austria and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and AT S 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 AT S Austria 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 AT S i.e., AT S and Methode Electronics go up and down completely randomly.

Pair Corralation between AT S and Methode Electronics

Assuming the 90 days horizon AT S Austria is expected to under-perform the Methode Electronics. In addition to that, AT S is 1.15 times more volatile than Methode Electronics. It trades about -0.09 of its total potential returns per unit of risk. Methode Electronics is currently generating about 0.02 per unit of volatility. If you would invest  1,096  in Methode Electronics on December 3, 2024 and sell it today you would lose (6.00) from holding Methode Electronics or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

AT S Austria  vs.  Methode Electronics

AT S Austria

Risk-Adjusted Performance

Very Weak

Over the last 90 days AT S Austria has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Methode Electronics

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Methode Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Methode Electronics is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with AT S and Methode Electronics

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

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.