Correlation Between Methode Electronics and Computer

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

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

Diversification Opportunities for Methode Electronics and Computer

-0.56

Correlation Coefficient

Methode Electronics  Computer

Excellent diversification

The 3 months correlation between Methode and Computer is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Computer And Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer And Technologies 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 Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer And Technologies has no effect on the direction of Methode Electronics i.e., Methode Electronics and Computer go up and down completely randomly.

Pair Corralation between Methode Electronics and Computer

Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the Computer. In addition to that, Methode Electronics is 1.28 times more volatile than Computer And Technologies. It trades about -0.02 of its total potential returns per unit of risk. Computer And Technologies is currently generating about 0.02 per unit of volatility. If you would invest  17.00  in Computer And Technologies on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Computer And Technologies or generate 0.0% return on investment over 90 days.

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

Methode Electronics  vs.  Computer And Technologies

Methode Electronics

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Methode Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Methode Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Computer And Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer And Technologies 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Methode Electronics and Computer

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

The idea behind Methode Electronics and Computer And Technologies 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..