Correlation Between KIMBALL ELECTRONICS and METHODE ELECTRONICS

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

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

Diversification Opportunities for KIMBALL ELECTRONICS and METHODE ELECTRONICS

0.23

Correlation Coefficient

KIMBALL ELECTRONICS  METHODE ELECTRONICS

Modest diversification

The 3 months correlation between KIMBALL and METHODE is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and METHODE ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METHODE ELECTRONICS and KIMBALL 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 KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and METHODE ELECTRONICS go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and METHODE ELECTRONICS

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to generate 2.18 times less return on investment than METHODE ELECTRONICS. But when comparing it to its historical volatility, KIMBALL ELECTRONICS is 1.7 times less risky than METHODE ELECTRONICS. It trades about 0.08 of its potential returns per unit of risk. METHODE ELECTRONICS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  957.00  in METHODE ELECTRONICS on September 17, 2024 and sell it today you would earn a total of  273.00  from holding METHODE ELECTRONICS or generate 28.53% return on investment over 90 days.

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

KIMBALL ELECTRONICS  vs.  METHODE ELECTRONICS

KIMBALL ELECTRONICS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KIMBALL ELECTRONICS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KIMBALL ELECTRONICS reported solid returns over the last few months and may actually be approaching a breakup point.

METHODE ELECTRONICS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in METHODE ELECTRONICS are ranked lower than 7 (%) 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 KIMBALL ELECTRONICS and METHODE ELECTRONICS

The main advantage of trading using opposite KIMBALL ELECTRONICS and METHODE ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.