Correlation Between Orica and Graphene Manufacturing

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

By analyzing existing cross correlation between Orica Ltd ADR and Graphene Manufacturing Group, you can compare the effects of market volatilities on Orica and Graphene Manufacturing 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 Graphene Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orica and Graphene Manufacturing.

Diversification Opportunities for Orica and Graphene Manufacturing

0.58

Correlation Coefficient

Orica  Graphene Manufacturing

Very weak diversification

The 3 months correlation between Orica and Graphene is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Orica Ltd ADR and Graphene Manufacturing Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphene Manufacturing 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 Ltd ADR are associated (or correlated) with Graphene Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphene Manufacturing has no effect on the direction of Orica i.e., Orica and Graphene Manufacturing go up and down completely randomly.

Pair Corralation between Orica and Graphene Manufacturing

Assuming the 90 days horizon Orica is expected to generate 7.59 times less return on investment than Graphene Manufacturing. But when comparing it to its historical volatility, Orica Ltd ADR is 1.49 times less risky than Graphene Manufacturing. It trades about 0.0 of its potential returns per unit of risk. Graphene Manufacturing Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Graphene Manufacturing Group on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Graphene Manufacturing Group or generate 0.0% return on investment over 90 days.

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

Orica Ltd ADR  vs.  Graphene Manufacturing Group

Orica Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orica Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Orica is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Graphene Manufacturing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphene Manufacturing Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Graphene Manufacturing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Orica and Graphene Manufacturing

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

The idea behind Orica Ltd ADR and Graphene Manufacturing Group 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.