Correlation Between Methanex and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Methanex and Sumitomo Chemical 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 Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methanex and Sumitomo Chemical Co, you can compare the effects of market volatilities on Methanex and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methanex and Sumitomo Chemical.
Diversification Opportunities for Methanex and Sumitomo Chemical
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Methanex and Sumitomo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Methanex and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Methanex i.e., Methanex and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Methanex and Sumitomo Chemical
Given the investment horizon of 90 days Methanex is expected to under-perform the Sumitomo Chemical. In addition to that, Methanex is 1.04 times more volatile than Sumitomo Chemical Co. It trades about -0.02 of its total potential returns per unit of risk. Sumitomo Chemical Co is currently generating about 0.07 per unit of volatility. If you would invest 1,030 in Sumitomo Chemical Co on September 1, 2024 and sell it today you would earn a total of 175.00 from holding Sumitomo Chemical Co or generate 16.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methanex vs. Sumitomo Chemical Co
Performance |
| Timeline |
| Methanex |
| Sumitomo Chemical |
Methanex and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methanex and Sumitomo Chemical
The main advantage of trading using opposite Methanex and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methanex position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Methanex vs. AdvanSix | Methanex vs. Lsb Industries | Methanex vs. Green Plains Renewable | Methanex vs. Tronox Holdings PLC |
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Check out your portfolio center.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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