Correlation Between Air Products and Orion Engineered

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

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

Diversification Opportunities for Air Products and Orion Engineered

0.39

Correlation Coefficient

Air Products  Orion Engineered

Weak diversification

The 3 months correlation between Air and Orion is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Orion Engineered Carbons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Engineered Carbons and Air Products 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 Air Products and are associated (or correlated) with Orion Engineered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Engineered Carbons has no effect on the direction of Air Products i.e., Air Products and Orion Engineered go up and down completely randomly.

Pair Corralation between Air Products and Orion Engineered

Considering the 90-day investment horizon Air Products and is expected to generate 0.35 times more return on investment than Orion Engineered. However, Air Products and is 2.85 times less risky than Orion Engineered. It trades about -0.55 of its potential returns per unit of risk. Orion Engineered Carbons is currently generating about -0.2 per unit of risk. If you would invest  32,785  in Air Products and on September 21, 2024 and sell it today you would lose (3,468) from holding Air Products and or give up 10.58% of portfolio value over 90 days.

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

Air Products and  vs.  Orion Engineered Carbons

Air Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Orion Engineered Carbons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orion Engineered Carbons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Orion Engineered is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Air Products and Orion Engineered

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

The idea behind Air Products and and Orion Engineered Carbons 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.