Correlation Between Finning International and Methanex

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

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

Diversification Opportunities for Finning International and Methanex

-0.3

Correlation Coefficient

Finning International  Methanex

Very good diversification

The 3 months correlation between Finning and Methanex is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Finning International and Methanex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methanex and Finning International 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 Finning International are associated (or correlated) with Methanex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methanex has no effect on the direction of Finning International i.e., Finning International and Methanex go up and down completely randomly.

Pair Corralation between Finning International and Methanex

Assuming the 90 days trading horizon Finning International is expected to generate 2.55 times less return on investment than Methanex. But when comparing it to its historical volatility, Finning International is 1.17 times less risky than Methanex. It trades about 0.04 of its potential returns per unit of risk. Methanex is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,057  in Methanex on September 5, 2024 and sell it today you would earn a total of  602.00  from holding Methanex or generate 9.94% return on investment over 90 days.

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

Finning International  vs.  Methanex

Finning International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Finning International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Finning International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Methanex

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Methanex are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Methanex may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Finning International and Methanex

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

The idea behind Finning International and Methanex 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..