Correlation Between Methode Electronics and OSI Systems

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

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

Diversification Opportunities for Methode Electronics and OSI Systems

-0.22

Correlation Coefficient

Methode Electronics  OSI Systems

Very good diversification

The 3 months correlation between Methode and OSI is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and OSI Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSI Systems 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 OSI Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSI Systems has no effect on the direction of Methode Electronics i.e., Methode Electronics and OSI Systems go up and down completely randomly.

Pair Corralation between Methode Electronics and OSI Systems

Considering the 90-day investment horizon Methode Electronics is expected to under-perform the OSI Systems. In addition to that, Methode Electronics is 1.75 times more volatile than OSI Systems. It trades about -0.14 of its total potential returns per unit of risk. OSI Systems is currently generating about 0.11 per unit of volatility. If you would invest  16,725  in OSI Systems on December 28, 2024 and sell it today you would earn a total of  3,186  from holding OSI Systems or generate 19.05% return on investment over 90 days.

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

Methode Electronics  vs.  OSI Systems

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

OSI Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OSI Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, OSI Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Methode Electronics and OSI Systems

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

The idea behind Methode Electronics and OSI Systems 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.