Correlation Between Methanex and Black Swan

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

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

Diversification Opportunities for Methanex and Black Swan

-0.67

Correlation Coefficient

Methanex  Black Swan

Excellent diversification

The 3 months correlation between Methanex and Black is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Methanex and Black Swan Graphene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Swan Graphene and Methanex 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 Methanex are associated (or correlated) with Black Swan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Swan Graphene has no effect on the direction of Methanex i.e., Methanex and Black Swan go up and down completely randomly.

Pair Corralation between Methanex and Black Swan

Given the investment horizon of 90 days Methanex is expected to generate 0.31 times more return on investment than Black Swan. However, Methanex is 3.19 times less risky than Black Swan. It trades about 0.14 of its potential returns per unit of risk. Black Swan Graphene is currently generating about -0.03 per unit of risk. If you would invest  3,939  in Methanex on September 20, 2024 and sell it today you would earn a total of  636.00  from holding Methanex or generate 16.15% return on investment over 90 days.

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

Methanex  vs.  Black Swan Graphene

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.

Black Swan Graphene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Swan Graphene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Methanex and Black Swan

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

The idea behind Methanex and Black Swan Graphene 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..