Correlation Between First Graphene and Methanex

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

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

Diversification Opportunities for First Graphene and Methanex

-0.25

Correlation Coefficient

First Graphene  Methanex

Very good diversification

The 3 months correlation between First and Methanex is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Graphene and Methanex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methanex and First Graphene 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 First Graphene 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 First Graphene i.e., First Graphene and Methanex go up and down completely randomly.

Pair Corralation between First Graphene and Methanex

Assuming the 90 days horizon First Graphene is expected to generate 4.81 times more return on investment than Methanex. However, First Graphene is 4.81 times more volatile than Methanex. It trades about 0.01 of its potential returns per unit of risk. Methanex is currently generating about -0.02 per unit of risk. If you would invest  3.80  in First Graphene on August 31, 2024 and sell it today you would lose (1.70) from holding First Graphene or give up 44.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

First Graphene  vs.  Methanex

First Graphene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Graphene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Methanex

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Methanex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Methanex may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with First Graphene and Methanex

The main advantage of trading using opposite First Graphene and Methanex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Graphene 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 First Graphene 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.