Correlation Between Haydale Graphene and Orica

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

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

Diversification Opportunities for Haydale Graphene and Orica

-0.43

Correlation Coefficient

Haydale Graphene  Orica

Very good diversification

The 3 months correlation between Haydale and Orica is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Haydale Graphene Industries and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited and Haydale Graphene 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 Haydale Graphene Industries 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 Limited has no effect on the direction of Haydale Graphene i.e., Haydale Graphene and Orica go up and down completely randomly.

Pair Corralation between Haydale Graphene and Orica

Assuming the 90 days horizon Haydale Graphene Industries is expected to generate 9.51 times more return on investment than Orica. However, Haydale Graphene is 9.51 times more volatile than Orica Limited. It trades about 0.04 of its potential returns per unit of risk. Orica Limited is currently generating about 0.18 per unit of risk. If you would invest  0.23  in Haydale Graphene Industries on December 29, 2024 and sell it today you would lose (0.03) from holding Haydale Graphene Industries or give up 13.04% of portfolio value over 90 days.

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

Haydale Graphene Industries  vs.  Orica Limited

Haydale Graphene Ind

Risk-Adjusted Performance

Insignificant

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

Orica Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orica Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Orica reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haydale Graphene and Orica

The main advantage of trading using opposite Haydale Graphene and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haydale Graphene 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 Haydale Graphene Industries and Orica Limited 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.