Correlation Between Methanex and Southern Copper

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

By analyzing existing cross correlation between Methanex and Southern Copper, you can compare the effects of market volatilities on Methanex and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methanex and Southern Copper.

Diversification Opportunities for Methanex and Southern Copper

-0.79

Correlation Coefficient

Methanex  Southern Copper

Pay attention - limited upside

The 3 months correlation between Methanex and Southern is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Methanex and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Methanex i.e., Methanex and Southern Copper go up and down completely randomly.

Pair Corralation between Methanex and Southern Copper

Given the investment horizon of 90 days Methanex is expected to generate 0.77 times more return on investment than Southern Copper. However, Methanex is 1.29 times less risky than Southern Copper. It trades about 0.35 of its potential returns per unit of risk. Southern Copper is currently generating about -0.18 per unit of risk. If you would invest  4,202  in Methanex on October 9, 2024 and sell it today you would earn a total of  883.00  from holding Methanex or generate 21.01% return on investment over 90 days.

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

Methanex  vs.  Southern Copper

Methanex

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Methanex are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Methanex demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Southern Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Copper 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 fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Methanex and Southern Copper

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

The idea behind Methanex and Southern Copper 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.