Correlation Between Orica and Orion Engineered

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

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

Diversification Opportunities for Orica and Orion Engineered

-0.71

Correlation Coefficient

Orica  Orion Engineered

Pay attention - limited upside

The 3 months correlation between Orica and Orion is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Orica Limited 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 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 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 Orica i.e., Orica and Orion Engineered go up and down completely randomly.

Pair Corralation between Orica and Orion Engineered

Assuming the 90 days horizon Orica Limited is expected to generate 0.54 times more return on investment than Orion Engineered. However, Orica Limited is 1.86 times less risky than Orion Engineered. It trades about 0.18 of its potential returns per unit of risk. Orion Engineered Carbons is currently generating about -0.08 per unit of risk. If you would invest  968.00  in Orica Limited on December 28, 2024 and sell it today you would earn a total of  132.00  from holding Orica Limited or generate 13.64% 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.  Orion Engineered Carbons

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.

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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Orica and Orion Engineered

The main advantage of trading using opposite Orica and Orion Engineered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orica 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 Orica Limited 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.