Correlation Between Cabot and Olin

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

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

Diversification Opportunities for Cabot and Olin

0.86

Correlation Coefficient

Cabot  Olin

Very poor diversification

The 3 months correlation between Cabot and Olin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Olin Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olin 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 Olin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olin has no effect on the direction of Cabot i.e., Cabot and Olin go up and down completely randomly.

Pair Corralation between Cabot and Olin

Considering the 90-day investment horizon Cabot is expected to generate 0.61 times more return on investment than Olin. However, Cabot is 1.63 times less risky than Olin. It trades about -0.09 of its potential returns per unit of risk. Olin Corporation is currently generating about -0.17 per unit of risk. If you would invest  9,227  in Cabot on December 26, 2024 and sell it today you would lose (870.00) from holding Cabot or give up 9.43% of portfolio value over 90 days.

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

Cabot  vs.  Olin Corp.

Cabot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Olin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Olin Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cabot and Olin

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

The idea behind Cabot and Olin Corporation 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.