Correlation Between Daktronics and Methode Electronics

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

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

Diversification Opportunities for Daktronics and Methode Electronics

0.95

Correlation Coefficient

Daktronics  Methode Electronics

Almost no diversification

The 3 months correlation between Daktronics and Methode is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Daktronics and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Daktronics 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 Daktronics 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 Daktronics i.e., Daktronics and Methode Electronics go up and down completely randomly.

Pair Corralation between Daktronics and Methode Electronics

Given the investment horizon of 90 days Daktronics is expected to generate 0.57 times more return on investment than Methode Electronics. However, Daktronics is 1.76 times less risky than Methode Electronics. It trades about -0.17 of its potential returns per unit of risk. Methode Electronics is currently generating about -0.15 per unit of risk. If you would invest  1,691  in Daktronics on December 30, 2024 and sell it today you would lose (487.00) from holding Daktronics or give up 28.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Daktronics  vs.  Methode Electronics

Daktronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daktronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Methode Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Methode Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Daktronics and Methode Electronics

The main advantage of trading using opposite Daktronics and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daktronics 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 Daktronics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.