Correlation Between Methode Electronics and Media

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

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

Diversification Opportunities for Methode Electronics and Media

-0.42

Correlation Coefficient

Methode Electronics  Media

Very good diversification

The 3 months correlation between Methode and Media is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Media and Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media and Games 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 Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media and Games has no effect on the direction of Methode Electronics i.e., Methode Electronics and Media go up and down completely randomly.

Pair Corralation between Methode Electronics and Media

Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the Media. In addition to that, Methode Electronics is 1.23 times more volatile than Media and Games. It trades about -0.2 of its total potential returns per unit of risk. Media and Games is currently generating about 0.05 per unit of volatility. If you would invest  318.00  in Media and Games on December 23, 2024 and sell it today you would earn a total of  23.00  from holding Media and Games or generate 7.23% 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.  Media and Games

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 fragile 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.

Media and Games

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Methode Electronics and Media

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

The idea behind Methode Electronics and Media and Games 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..