Correlation Between HPQ Silicon and Methanex

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

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

Diversification Opportunities for HPQ Silicon and Methanex

-0.7

Correlation Coefficient

HPQ Silicon  Methanex

Excellent diversification

The 3 months correlation between HPQ and Methanex is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding HPQ Silicon Resources and Methanex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methanex and HPQ Silicon 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 HPQ Silicon Resources 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 HPQ Silicon i.e., HPQ Silicon and Methanex go up and down completely randomly.

Pair Corralation between HPQ Silicon and Methanex

Assuming the 90 days horizon HPQ Silicon Resources is expected to under-perform the Methanex. In addition to that, HPQ Silicon is 2.15 times more volatile than Methanex. It trades about -0.15 of its total potential returns per unit of risk. Methanex is currently generating about 0.22 per unit of volatility. If you would invest  5,248  in Methanex on September 14, 2024 and sell it today you would earn a total of  1,284  from holding Methanex or generate 24.47% return on investment over 90 days.

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

HPQ Silicon Resources  vs.  Methanex

HPQ Silicon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HPQ Silicon Resources 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.

Methanex

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Methanex are ranked lower than 17 (%) 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.

Pair Trading with HPQ Silicon and Methanex

The main advantage of trading using opposite HPQ Silicon and Methanex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HPQ Silicon 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 HPQ Silicon Resources 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.