Correlation Between Methode Electronics and Taitron Components

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

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

Diversification Opportunities for Methode Electronics and Taitron Components

0.57

Correlation Coefficient

Methode Electronics  Taitron Components

Very weak diversification

The 3 months correlation between Methode and Taitron is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and Taitron Components Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taitron Components 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 Taitron Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taitron Components has no effect on the direction of Methode Electronics i.e., Methode Electronics and Taitron Components go up and down completely randomly.

Pair Corralation between Methode Electronics and Taitron Components

Considering the 90-day investment horizon Methode Electronics is expected to generate 2.8 times less return on investment than Taitron Components. But when comparing it to its historical volatility, Methode Electronics is 2.66 times less risky than Taitron Components. It trades about 0.06 of its potential returns per unit of risk. Taitron Components Incorporated is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  213.00  in Taitron Components Incorporated on July 30, 2025 and sell it today you would earn a total of  42.00  from holding Taitron Components Incorporated or generate 19.72% 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.  Taitron Components Incorporate

Methode Electronics

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Methode Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Methode Electronics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Taitron Components

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Taitron Components Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Taitron Components unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Methode Electronics and Taitron Components

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

The idea behind Methode Electronics and Taitron Components Incorporated 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.