Correlation Between Methode Electronics and CANADA RARE
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and CANADA RARE 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 CANADA RARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and CANADA RARE EARTH, you can compare the effects of market volatilities on Methode Electronics and CANADA RARE 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 CANADA RARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and CANADA RARE.
Diversification Opportunities for Methode Electronics and CANADA RARE
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Methode and CANADA is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and CANADA RARE EARTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANADA RARE EARTH 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 CANADA RARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANADA RARE EARTH has no effect on the direction of Methode Electronics i.e., Methode Electronics and CANADA RARE go up and down completely randomly.
Pair Corralation between Methode Electronics and CANADA RARE
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the CANADA RARE. But the stock apears to be less risky and, when comparing its historical volatility, Methode Electronics is 2.8 times less risky than CANADA RARE. The stock trades about -0.23 of its potential returns per unit of risk. The CANADA RARE EARTH is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 1.10 in CANADA RARE EARTH on December 21, 2024 and sell it today you would lose (0.60) from holding CANADA RARE EARTH or give up 54.55% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Methode Electronics vs. CANADA RARE EARTH
Performance |
Timeline |
Methode Electronics |
CANADA RARE EARTH |
Methode Electronics and CANADA RARE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Methode Electronics and CANADA RARE
The main advantage of trading using opposite Methode Electronics and CANADA RARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, CANADA RARE 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 CANADA RARE will offset losses from the drop in CANADA RARE's long position.Methode Electronics vs. EAGLE MATERIALS | Methode Electronics vs. Rayonier Advanced Materials | Methode Electronics vs. Perdoceo Education | Methode Electronics vs. VULCAN MATERIALS |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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