Correlation Between Graphene Manufacturing and Orica

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

By analyzing existing cross correlation between Graphene Manufacturing Group and Orica Ltd ADR, you can compare the effects of market volatilities on Graphene Manufacturing and Orica 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 Graphene Manufacturing with a short position of Orica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graphene Manufacturing and Orica.

Diversification Opportunities for Graphene Manufacturing and Orica

0.24

Correlation Coefficient

Graphene Manufacturing  Orica

Modest diversification

The 3 months correlation between Graphene and Orica is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Graphene Manufacturing Group and Orica Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Ltd ADR and Graphene Manufacturing 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 Graphene Manufacturing Group are associated (or correlated) with Orica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orica Ltd ADR has no effect on the direction of Graphene Manufacturing i.e., Graphene Manufacturing and Orica go up and down completely randomly.

Pair Corralation between Graphene Manufacturing and Orica

Assuming the 90 days horizon Graphene Manufacturing Group is expected to generate 1.65 times more return on investment than Orica. However, Graphene Manufacturing is 1.65 times more volatile than Orica Ltd ADR. It trades about 0.04 of its potential returns per unit of risk. Orica Ltd ADR is currently generating about 0.06 per unit of risk. If you would invest  46.00  in Graphene Manufacturing Group on December 29, 2024 and sell it today you would earn a total of  2.00  from holding Graphene Manufacturing Group or generate 4.35% return on investment over 90 days.

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

Graphene Manufacturing Group  vs.  Orica Ltd ADR

Graphene Manufacturing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Graphene Manufacturing Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Graphene Manufacturing reported solid returns over the last few months and may actually be approaching a breakup point.

Orica Ltd ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orica Ltd ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, Orica showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graphene Manufacturing and Orica

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

The idea behind Graphene Manufacturing Group and Orica Ltd ADR 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.