Correlation Between Orica and Albemarle Corp

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

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

Diversification Opportunities for Orica and Albemarle Corp

-0.78

Correlation Coefficient

Orica  Albemarle Corp

Pay attention - limited upside

The 3 months correlation between Orica and Albemarle is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Orica Limited and Albemarle Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle Corp and Orica 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 Orica Limited are associated (or correlated) with Albemarle Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle Corp has no effect on the direction of Orica i.e., Orica and Albemarle Corp go up and down completely randomly.

Pair Corralation between Orica and Albemarle Corp

Assuming the 90 days horizon Orica Limited is expected to under-perform the Albemarle Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Orica Limited is 9.8 times less risky than Albemarle Corp. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Albemarle Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,374  in Albemarle Corp on September 1, 2024 and sell it today you would earn a total of  2,396  from holding Albemarle Corp or generate 28.61% return on investment over 90 days.

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

Orica Limited  vs.  Albemarle Corp

Orica Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orica Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Orica is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Albemarle Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Albemarle Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orica and Albemarle Corp

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

The idea behind Orica Limited and Albemarle Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.