Correlation Between Orion Engineered and Air Products

Can any of the company-specific risk be diversified away by investing in both Orion Engineered and Air Products 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 Air Products 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 Air Products and, you can compare the effects of market volatilities on Orion Engineered and Air Products 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 Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orion Engineered and Air Products.

Diversification Opportunities for Orion Engineered and Air Products

0.39

Correlation Coefficient

Orion Engineered  Air Products

Weak diversification

The 3 months correlation between Orion and Air is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Orion Engineered Carbons and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Orion Engineered i.e., Orion Engineered and Air Products go up and down completely randomly.

Pair Corralation between Orion Engineered and Air Products

Considering the 90-day investment horizon Orion Engineered Carbons is expected to under-perform the Air Products. In addition to that, Orion Engineered is 2.85 times more volatile than Air Products and. It trades about -0.2 of its total potential returns per unit of risk. Air Products and is currently generating about -0.55 per unit of volatility. If you would invest  32,785  in Air Products and on September 21, 2024 and sell it today you would lose (3,468) from holding Air Products and or give up 10.58% of portfolio value over 90 days.

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

Orion Engineered Carbons  vs.  Air Products and

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 rather sound technical and fundamental indicators, Orion Engineered is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Air Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Orion Engineered and Air Products

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

The idea behind Orion Engineered Carbons and Air Products and 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 Stocks Directory module to find actively traded stocks across global markets.