Correlation Between Methode Electronics and ONWARD MEDICAL

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

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

Diversification Opportunities for Methode Electronics and ONWARD MEDICAL

0.73

Correlation Coefficient

Methode Electronics  ONWARD MEDICAL

Poor diversification

The 3 months correlation between Methode and ONWARD is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and ONWARD MEDICAL BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONWARD MEDICAL BV and Methode Electronics 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 Methode Electronics are associated (or correlated) with ONWARD MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONWARD MEDICAL BV has no effect on the direction of Methode Electronics i.e., Methode Electronics and ONWARD MEDICAL go up and down completely randomly.

Pair Corralation between Methode Electronics and ONWARD MEDICAL

Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the ONWARD MEDICAL. In addition to that, Methode Electronics is 1.09 times more volatile than ONWARD MEDICAL BV. It trades about -0.22 of its total potential returns per unit of risk. ONWARD MEDICAL BV is currently generating about -0.04 per unit of volatility. If you would invest  524.00  in ONWARD MEDICAL BV on December 21, 2024 and sell it today you would lose (71.00) from holding ONWARD MEDICAL BV or give up 13.55% of portfolio value over 90 days.

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

Methode Electronics  vs.  ONWARD MEDICAL BV

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 unsteady 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.

ONWARD MEDICAL BV

Risk-Adjusted Performance

Very Weak

Over the last 90 days ONWARD MEDICAL BV 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.

Pair Trading with Methode Electronics and ONWARD MEDICAL

The main advantage of trading using opposite Methode Electronics and ONWARD MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, ONWARD MEDICAL 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 ONWARD MEDICAL will offset losses from the drop in ONWARD MEDICAL's long position.

The idea behind Methode Electronics and ONWARD MEDICAL BV 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 Transaction History module to view history of all your transactions and understand their impact on performance.