Correlation Between Methode Electronics and Shin Etsu

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

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

Diversification Opportunities for Methode Electronics and Shin Etsu

0.4

Correlation Coefficient

Methode Electronics  Shin Etsu

Very weak diversification

The 3 months correlation between Methode and Shin is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Shin Etsu Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Etsu Chemical and Methode 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 Methode Electronics are associated (or correlated) with Shin Etsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Etsu Chemical has no effect on the direction of Methode Electronics i.e., Methode Electronics and Shin Etsu go up and down completely randomly.

Pair Corralation between Methode Electronics and Shin Etsu

Assuming the 90 days trading horizon Methode Electronics is expected to generate 1.23 times less return on investment than Shin Etsu. In addition to that, Methode Electronics is 1.6 times more volatile than Shin Etsu Chemical Co. It trades about 0.04 of its total potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about 0.07 per unit of volatility. If you would invest  2,464  in Shin Etsu Chemical Co on April 25, 2025 and sell it today you would earn a total of  226.00  from holding Shin Etsu Chemical Co or generate 9.17% return on investment over 90 days.

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

Methode Electronics  vs.  Shin Etsu Chemical Co

Methode Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Methode Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Methode Electronics may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Shin Etsu Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Etsu Chemical Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shin Etsu may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Methode Electronics and Shin Etsu

The main advantage of trading using opposite Methode Electronics and Shin Etsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, Shin Etsu 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 Shin Etsu will offset losses from the drop in Shin Etsu's long position.

The idea behind Methode Electronics and Shin Etsu Chemical Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.