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 ADR1 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

-0.47

Correlation Coefficient

HEXAGON AB  MKS Instruments

Very good diversification

The 3 months correlation between HEXAGON and MKS is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding HEXAGON AB ADR1 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 ADR1 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 trading horizon HEXAGON AB ADR1 is expected to under-perform the MKS Instruments. But the stock apears to be less risky and, when comparing its historical volatility, HEXAGON AB ADR1 is 1.45 times less risky than MKS Instruments. The stock trades about -0.11 of its potential returns per unit of risk. The MKS Instruments is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  10,733  in MKS Instruments on August 31, 2024 and sell it today you would lose (83.00) from holding MKS Instruments or give up 0.77% of portfolio value over 90 days.

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

HEXAGON AB ADR1  vs.  MKS Instruments

HEXAGON AB ADR1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEXAGON AB ADR1 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 and fundamental 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.

MKS Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MKS Instruments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 ADR1 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.