Correlation Between Dow Jones and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Methode Electronics, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Methode Electronics.
Diversification Opportunities for Dow Jones and Methode Electronics
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Methode is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Methode Electronics go up and down completely randomly.
Pair Corralation between Dow Jones and Methode Electronics
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.15 times more return on investment than Methode Electronics. However, Dow Jones Industrial is 6.6 times less risky than Methode Electronics. It trades about 0.16 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.01 per unit of risk. If you would invest 4,234,365 in Dow Jones Industrial on May 27, 2025 and sell it today you would earn a total of 293,882 from holding Dow Jones Industrial or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Methode Electronics
Performance |
| Timeline |
Dow Jones and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Methode Electronics
Pair trading matchups for Methode Electronics
Pair Trading with Dow Jones and Methode Electronics
The main advantage of trading using opposite Dow Jones and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Air Products and | Dow Jones vs. CVR Partners LP | Dow Jones vs. Park Electrochemical | Dow Jones vs. Sealed Air |
| Methode Electronics vs. Sanmina | Methode Electronics vs. Benchmark Electronics | Methode Electronics vs. OSI Systems | Methode Electronics vs. Celestica |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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