Correlation Between Element Solutions and Orion Engineered

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

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

Diversification Opportunities for Element Solutions and Orion Engineered

0.22

Correlation Coefficient

Element Solutions  Orion Engineered

Modest diversification

The 3 months correlation between Element and Orion is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions 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 Element Solutions 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 Element Solutions 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 Element Solutions i.e., Element Solutions and Orion Engineered go up and down completely randomly.

Pair Corralation between Element Solutions and Orion Engineered

Considering the 90-day investment horizon Element Solutions is expected to generate 0.74 times more return on investment than Orion Engineered. However, Element Solutions is 1.36 times less risky than Orion Engineered. It trades about -0.06 of its potential returns per unit of risk. Orion Engineered Carbons is currently generating about -0.08 per unit of risk. If you would invest  2,543  in Element Solutions on December 28, 2024 and sell it today you would lose (183.00) from holding Element Solutions or give up 7.2% of portfolio value over 90 days.

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

Element Solutions  vs.  Orion Engineered Carbons

Element Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Orion Engineered Carbons

Risk-Adjusted Performance

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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Element Solutions and Orion Engineered

The main advantage of trading using opposite Element Solutions and Orion Engineered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Solutions 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 Element Solutions 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.