Correlation Between Inrad Optics and Methode Electronics

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

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

Diversification Opportunities for Inrad Optics and Methode Electronics

0.0

Correlation Coefficient

Inrad Optics  Methode Electronics

Pay attention - limited upside

The 3 months correlation between Inrad and Methode is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Inrad Optics and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Inrad Optics 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 Inrad Optics 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 Inrad Optics i.e., Inrad Optics and Methode Electronics go up and down completely randomly.

Pair Corralation between Inrad Optics and Methode Electronics

If you would invest  1,127  in Methode Electronics on October 1, 2024 and sell it today you would earn a total of  96.00  from holding Methode Electronics or generate 8.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Inrad Optics  vs.  Methode Electronics

Inrad Optics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inrad Optics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Inrad Optics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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. Despite fairly unfluctuating technical and fundamental indicators, Methode Electronics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inrad Optics and Methode Electronics

The main advantage of trading using opposite Inrad Optics and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inrad Optics 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' long position.

The idea behind Inrad Optics 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.