Correlation Between International Flavors and Orion Engineered

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

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

Diversification Opportunities for International Flavors and Orion Engineered

0.49

Correlation Coefficient

International Flavors  Orion Engineered

Very weak diversification

The 3 months correlation between International and Orion is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc 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 International Flavors 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 International Flavors Fragrances 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 International Flavors i.e., International Flavors and Orion Engineered go up and down completely randomly.

Pair Corralation between International Flavors and Orion Engineered

Considering the 90-day investment horizon International Flavors Fragrances is expected to generate 0.57 times more return on investment than Orion Engineered. However, International Flavors Fragrances is 1.75 times less risky than Orion Engineered. It trades about -0.1 of its potential returns per unit of risk. Orion Engineered Carbons is currently generating about -0.11 per unit of risk. If you would invest  8,354  in International Flavors Fragrances on December 30, 2024 and sell it today you would lose (706.00) from holding International Flavors Fragrances or give up 8.45% of portfolio value over 90 days.

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

International Flavors Fragranc  vs.  Orion Engineered Carbons

International Flavors

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Flavors Fragrances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with International Flavors and Orion Engineered

The main advantage of trading using opposite International Flavors and Orion Engineered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Flavors 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 International Flavors Fragrances 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.