Correlation Between GM and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Methode Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Methode Electronics, you can compare the effects of market volatilities on GM 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 GM with a short position of Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Methode Electronics.
Diversification Opportunities for GM and Methode Electronics
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Methode is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics and GM 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 General Motors 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 GM i.e., GM and Methode Electronics go up and down completely randomly.
Pair Corralation between GM and Methode Electronics
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.75 times more return on investment than Methode Electronics. However, General Motors is 1.34 times less risky than Methode Electronics. It trades about 0.18 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.02 per unit of risk. If you would invest 5,609 in General Motors on August 16, 2025 and sell it today you would earn a total of 1,580 from holding General Motors or generate 28.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
General Motors vs. Methode Electronics
Performance |
| Timeline |
| General Motors |
| Methode Electronics |
GM and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Methode Electronics
The main advantage of trading using opposite GM and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Methode Electronics vs. SIVERS SEMICONDUCTORS AB | Methode Electronics vs. NorAm Drilling AS | Methode Electronics vs. BANK HANDLOWY | Methode Electronics vs. Takara Holdings |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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