Correlation Between Cabot and Orion Engineered

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

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

Diversification Opportunities for Cabot and Orion Engineered

-0.05

Correlation Coefficient

Cabot  Orion Engineered

Good diversification

The 3 months correlation between Cabot and Orion is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cabot 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 Cabot 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 Cabot 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 Cabot i.e., Cabot and Orion Engineered go up and down completely randomly.

Pair Corralation between Cabot and Orion Engineered

Considering the 90-day investment horizon Cabot is expected to generate 10.15 times less return on investment than Orion Engineered. But when comparing it to its historical volatility, Cabot is 1.74 times less risky than Orion Engineered. It trades about 0.04 of its potential returns per unit of risk. Orion Engineered Carbons is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,499  in Orion Engineered Carbons on August 30, 2024 and sell it today you would earn a total of  340.00  from holding Orion Engineered Carbons or generate 22.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Cabot  vs.  Orion Engineered Carbons

Cabot

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cabot are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Cabot is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cabot and Orion Engineered

The main advantage of trading using opposite Cabot and Orion Engineered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot 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 Cabot 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.