Correlation Between Methode Electronics and TMBThanachart Bank

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

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

Diversification Opportunities for Methode Electronics and TMBThanachart Bank

0.75

Correlation Coefficient

Methode Electronics  TMBThanachart Bank

Poor diversification

The 3 months correlation between Methode and TMBThanachart is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and TMBThanachart Bank PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMBThanachart Bank PCL 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 TMBThanachart Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMBThanachart Bank PCL has no effect on the direction of Methode Electronics i.e., Methode Electronics and TMBThanachart Bank go up and down completely randomly.

Pair Corralation between Methode Electronics and TMBThanachart Bank

Assuming the 90 days trading horizon Methode Electronics is expected to generate 2.94 times more return on investment than TMBThanachart Bank. However, Methode Electronics is 2.94 times more volatile than TMBThanachart Bank PCL. It trades about 0.15 of its potential returns per unit of risk. TMBThanachart Bank PCL is currently generating about 0.13 per unit of risk. If you would invest  825.00  in Methode Electronics on October 25, 2024 and sell it today you would earn a total of  325.00  from holding Methode Electronics or generate 39.39% return on investment over 90 days.

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

Methode Electronics  vs.  TMBThanachart Bank PCL

Methode Electronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Methode Electronics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Methode Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

TMBThanachart Bank PCL

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TMBThanachart Bank PCL are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TMBThanachart Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Methode Electronics and TMBThanachart Bank

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

The idea behind Methode Electronics and TMBThanachart Bank PCL 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.