Correlation Between Orica and G6 Materials

Can any of the company-specific risk be diversified away by investing in both Orica and G6 Materials 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 G6 Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Orica Limited and G6 Materials Corp, you can compare the effects of market volatilities on Orica and G6 Materials 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 G6 Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orica and G6 Materials.

Diversification Opportunities for Orica and G6 Materials

0.62

Correlation Coefficient

Orica  G6 Materials

Poor diversification

The 3 months correlation between Orica and GPHBF is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Orica Limited and G6 Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G6 Materials 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 G6 Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G6 Materials Corp has no effect on the direction of Orica i.e., Orica and G6 Materials go up and down completely randomly.

Pair Corralation between Orica and G6 Materials

Assuming the 90 days horizon Orica is expected to generate 20.7 times less return on investment than G6 Materials. But when comparing it to its historical volatility, Orica Limited is 17.12 times less risky than G6 Materials. It trades about 0.18 of its potential returns per unit of risk. G6 Materials Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3.05  in G6 Materials Corp on December 28, 2024 and sell it today you would earn a total of  10.95  from holding G6 Materials Corp or generate 359.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Orica Limited  vs.  G6 Materials Corp

Orica Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orica Limited are ranked lower than 14 (%) 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.

G6 Materials Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in G6 Materials Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, G6 Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orica and G6 Materials

The main advantage of trading using opposite Orica and G6 Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orica position performs unexpectedly, G6 Materials 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 G6 Materials will offset losses from the drop in G6 Materials' long position.

The idea behind Orica Limited and G6 Materials 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.