Correlation Between Quantum and Methode Electronics

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

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

Diversification Opportunities for Quantum and Methode Electronics

0.52

Correlation Coefficient

Quantum  Methode Electronics

Very weak diversification

The 3 months correlation between Quantum and Methode is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Quantum and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Quantum 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 Quantum 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 Quantum i.e., Quantum and Methode Electronics go up and down completely randomly.

Pair Corralation between Quantum and Methode Electronics

Given the investment horizon of 90 days Quantum is expected to generate 7.09 times more return on investment than Methode Electronics. However, Quantum is 7.09 times more volatile than Methode Electronics. It trades about 0.23 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.05 per unit of risk. If you would invest  325.00  in Quantum on September 23, 2024 and sell it today you would earn a total of  4,275  from holding Quantum or generate 1315.38% return on investment over 90 days.

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

Quantum  vs.  Methode Electronics

Quantum

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Quantum displayed 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. Despite fairly inconsistent 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 Quantum and Methode Electronics

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

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.