Correlation Between Hexagon AB and MKS Instruments

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

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

Diversification Opportunities for Hexagon AB and MKS Instruments

-0.4

Correlation Coefficient

Hexagon AB  MKS Instruments

Very good diversification

The 3 months correlation between Hexagon and MKS is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hexagon AB ADR and MKS Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKS Instruments and Hexagon AB 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 Hexagon AB ADR are associated (or correlated) with MKS Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKS Instruments has no effect on the direction of Hexagon AB i.e., Hexagon AB and MKS Instruments go up and down completely randomly.

Pair Corralation between Hexagon AB and MKS Instruments

Assuming the 90 days horizon Hexagon AB ADR is expected to generate 0.66 times more return on investment than MKS Instruments. However, Hexagon AB ADR is 1.52 times less risky than MKS Instruments. It trades about 0.12 of its potential returns per unit of risk. MKS Instruments is currently generating about -0.09 per unit of risk. If you would invest  961.00  in Hexagon AB ADR on December 27, 2024 and sell it today you would earn a total of  141.00  from holding Hexagon AB ADR or generate 14.67% return on investment over 90 days.

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

Hexagon AB ADR  vs.  MKS Instruments

Hexagon AB ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hexagon AB ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Hexagon AB showed solid returns over the last few months and may actually be approaching a breakup point.

MKS Instruments

Risk-Adjusted Performance

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Hexagon AB and MKS Instruments

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

The idea behind Hexagon AB ADR and MKS Instruments 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.