Correlation Between Kuraray and Methanex

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

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

Diversification Opportunities for Kuraray and Methanex

-0.08

Correlation Coefficient

Kuraray  Methanex

Good diversification

The 3 months correlation between Kuraray and Methanex is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kuraray Co and Methanex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methanex and Kuraray 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 Kuraray Co 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 Kuraray i.e., Kuraray and Methanex go up and down completely randomly.

Pair Corralation between Kuraray and Methanex

Assuming the 90 days horizon Kuraray Co is expected to generate 0.98 times more return on investment than Methanex. However, Kuraray Co is 1.02 times less risky than Methanex. It trades about 0.07 of its potential returns per unit of risk. Methanex is currently generating about 0.03 per unit of risk. If you would invest  2,443  in Kuraray Co on September 20, 2024 and sell it today you would earn a total of  2,007  from holding Kuraray Co or generate 82.15% return on investment over 90 days.

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

Kuraray Co  vs.  Methanex

Kuraray

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuraray Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Kuraray is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Methanex

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Methanex are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Methanex demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuraray and Methanex

The main advantage of trading using opposite Kuraray and Methanex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kuraray 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 Kuraray Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.