Correlation Between Orion Engineered and Alto Ingredients

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

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

Diversification Opportunities for Orion Engineered and Alto Ingredients

-0.59

Correlation Coefficient

Orion Engineered  Alto Ingredients

Excellent diversification

The 3 months correlation between Orion and Alto is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Orion Engineered Carbons and Alto Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alto Ingredients and Orion Engineered 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 Orion Engineered Carbons are associated (or correlated) with Alto Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alto Ingredients has no effect on the direction of Orion Engineered i.e., Orion Engineered and Alto Ingredients go up and down completely randomly.

Pair Corralation between Orion Engineered and Alto Ingredients

Considering the 90-day investment horizon Orion Engineered Carbons is expected to under-perform the Alto Ingredients. But the stock apears to be less risky and, when comparing its historical volatility, Orion Engineered Carbons is 2.04 times less risky than Alto Ingredients. The stock trades about -0.01 of its potential returns per unit of risk. The Alto Ingredients is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  310.00  in Alto Ingredients on October 10, 2024 and sell it today you would lose (136.00) from holding Alto Ingredients or give up 43.87% of portfolio value over 90 days.

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

Orion Engineered Carbons  vs.  Alto Ingredients

Orion Engineered Carbons

Risk-Adjusted Performance

0 of 100

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.

Alto Ingredients

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alto Ingredients are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Alto Ingredients displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orion Engineered and Alto Ingredients

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

The idea behind Orion Engineered Carbons and Alto Ingredients 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.