Correlation Between Oil Dri and Element Solutions

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

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

Diversification Opportunities for Oil Dri and Element Solutions

-0.01

Correlation Coefficient

Oil Dri  Element Solutions

Good diversification

The 3 months correlation between Oil and Element is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Oil Dri and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and Oil Dri 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 Oil Dri are associated (or correlated) with Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Oil Dri i.e., Oil Dri and Element Solutions go up and down completely randomly.

Pair Corralation between Oil Dri and Element Solutions

Considering the 90-day investment horizon Oil Dri is expected to generate 1.29 times more return on investment than Element Solutions. However, Oil Dri is 1.29 times more volatile than Element Solutions. It trades about 0.04 of its potential returns per unit of risk. Element Solutions is currently generating about -0.07 per unit of risk. If you would invest  4,379  in Oil Dri on December 27, 2024 and sell it today you would earn a total of  195.00  from holding Oil Dri or generate 4.45% return on investment over 90 days.

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

Oil Dri  vs.  Element Solutions

Oil Dri

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Dri are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Oil Dri is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Element Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Oil Dri and Element Solutions

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

The idea behind Oil Dri and Element Solutions 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.