Correlation Between STRAYER EDUCATION and METHODE ELECTRONICS

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

By analyzing existing cross correlation between STRAYER EDUCATION and METHODE ELECTRONICS, you can compare the effects of market volatilities on STRAYER EDUCATION and METHODE ELECTRONICS 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 STRAYER EDUCATION with a short position of METHODE ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of STRAYER EDUCATION and METHODE ELECTRONICS.

Diversification Opportunities for STRAYER EDUCATION and METHODE ELECTRONICS

0.62

Correlation Coefficient

STRAYER EDUCATION  METHODE ELECTRONICS

Poor diversification

The 3 months correlation between STRAYER and METHODE is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding STRAYER EDUCATION and METHODE ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METHODE ELECTRONICS and STRAYER EDUCATION 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 STRAYER EDUCATION are associated (or correlated) with METHODE ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METHODE ELECTRONICS has no effect on the direction of STRAYER EDUCATION i.e., STRAYER EDUCATION and METHODE ELECTRONICS go up and down completely randomly.

Pair Corralation between STRAYER EDUCATION and METHODE ELECTRONICS

Assuming the 90 days trading horizon STRAYER EDUCATION is expected to generate 0.45 times more return on investment than METHODE ELECTRONICS. However, STRAYER EDUCATION is 2.2 times less risky than METHODE ELECTRONICS. It trades about -0.14 of its potential returns per unit of risk. METHODE ELECTRONICS is currently generating about -0.23 per unit of risk. If you would invest  9,350  in STRAYER EDUCATION on October 13, 2024 and sell it today you would lose (400.00) from holding STRAYER EDUCATION or give up 4.28% of portfolio value over 90 days.

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

STRAYER EDUCATION  vs.  METHODE ELECTRONICS

STRAYER EDUCATION

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STRAYER EDUCATION are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, STRAYER EDUCATION exhibited solid returns over the last few months and may actually be approaching a breakup point.

METHODE ELECTRONICS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in METHODE ELECTRONICS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, METHODE ELECTRONICS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STRAYER EDUCATION and METHODE ELECTRONICS

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

The idea behind STRAYER EDUCATION and METHODE ELECTRONICS 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.