Correlation Between Kronos Worldwide and Orion Engineered

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

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

Diversification Opportunities for Kronos Worldwide and Orion Engineered

0.72

Correlation Coefficient

Kronos Worldwide  Orion Engineered

Poor diversification

The 3 months correlation between Kronos and Orion is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Kronos Worldwide 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 Kronos Worldwide 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 Kronos Worldwide 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 Kronos Worldwide i.e., Kronos Worldwide and Orion Engineered go up and down completely randomly.

Pair Corralation between Kronos Worldwide and Orion Engineered

Considering the 90-day investment horizon Kronos Worldwide is expected to under-perform the Orion Engineered. But the stock apears to be less risky and, when comparing its historical volatility, Kronos Worldwide is 1.03 times less risky than Orion Engineered. The stock trades about -0.15 of its potential returns per unit of risk. The Orion Engineered Carbons is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,567  in Orion Engineered Carbons on December 27, 2024 and sell it today you would lose (224.00) from holding Orion Engineered Carbons or give up 14.29% of portfolio value over 90 days.

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

Kronos Worldwide  vs.  Orion Engineered Carbons

Kronos Worldwide

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kronos Worldwide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic 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.

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 Kronos Worldwide and Orion Engineered

The main advantage of trading using opposite Kronos Worldwide and Orion Engineered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kronos Worldwide 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 Kronos Worldwide 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.