Correlation Between Methanor and Carmat

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

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

Diversification Opportunities for Methanor and Carmat

0.79

Correlation Coefficient

Methanor  Carmat

Poor diversification

The 3 months correlation between Methanor and Carmat is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Methanor and Carmat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmat and Methanor 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 Methanor are associated (or correlated) with Carmat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmat has no effect on the direction of Methanor i.e., Methanor and Carmat go up and down completely randomly.

Pair Corralation between Methanor and Carmat

Assuming the 90 days trading horizon Methanor is expected to generate 0.5 times more return on investment than Carmat. However, Methanor is 1.99 times less risky than Carmat. It trades about -0.05 of its potential returns per unit of risk. Carmat is currently generating about -0.03 per unit of risk. If you would invest  328.00  in Methanor on September 24, 2024 and sell it today you would lose (158.00) from holding Methanor or give up 48.17% of portfolio value over 90 days.

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

Methanor  vs.  Carmat

Methanor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Methanor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Carmat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Methanor and Carmat

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

The idea behind Methanor and Carmat 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.