Correlation Between Methanex and Royal Helium

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

By analyzing existing cross correlation between Methanex and Royal Helium, you can compare the effects of market volatilities on Methanex and Royal Helium 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 Royal Helium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methanex and Royal Helium.

Diversification Opportunities for Methanex and Royal Helium

-0.73

Correlation Coefficient

Methanex  Royal Helium

Pay attention - limited upside

The 3 months correlation between Methanex and Royal is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Methanex and Royal Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Helium 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 Royal Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Helium has no effect on the direction of Methanex i.e., Methanex and Royal Helium go up and down completely randomly.

Pair Corralation between Methanex and Royal Helium

Assuming the 90 days horizon Methanex is expected to generate 0.19 times more return on investment than Royal Helium. However, Methanex is 5.29 times less risky than Royal Helium. It trades about 0.21 of its potential returns per unit of risk. Royal Helium is currently generating about -0.07 per unit of risk. If you would invest  5,248  in Methanex on September 15, 2024 and sell it today you would earn a total of  1,263  from holding Methanex or generate 24.07% return on investment over 90 days.

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

Methanex  vs.  Royal Helium

Methanex

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Methanex are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Methanex displayed solid returns over the last few months and may actually be approaching a breakup point.

Royal Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Methanex and Royal Helium

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

The idea behind Methanex and Royal Helium 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 Commodity Directory module to find actively traded commodities issued by global exchanges.