Correlation Between Orica and Sherwin Williams

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

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

Diversification Opportunities for Orica and Sherwin Williams

-0.21

Correlation Coefficient

Orica  Sherwin Williams

Very good diversification

The 3 months correlation between Orica and Sherwin is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Orica Limited and Sherwin Williams Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwin Williams 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 Sherwin Williams. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherwin Williams has no effect on the direction of Orica i.e., Orica and Sherwin Williams go up and down completely randomly.

Pair Corralation between Orica and Sherwin Williams

Assuming the 90 days horizon Orica Limited is expected to under-perform the Sherwin Williams. But the pink sheet apears to be less risky and, when comparing its historical volatility, Orica Limited is 3.54 times less risky than Sherwin Williams. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Sherwin Williams Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  36,308  in Sherwin Williams Co on September 3, 2024 and sell it today you would earn a total of  3,432  from holding Sherwin Williams Co or generate 9.45% return on investment over 90 days.

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

Orica Limited  vs.  Sherwin Williams Co

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.

Sherwin Williams

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sherwin Williams Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical indicators, Sherwin Williams may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Orica and Sherwin Williams

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

The idea behind Orica Limited and Sherwin Williams Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.