Correlation Between Orion Engineered and Cabot

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

Diversification Opportunities for Orion Engineered and Cabot

0.87

Correlation Coefficient

Orion Engineered  Cabot

Very poor diversification

The 3 months correlation between Orion and Cabot is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Orion Engineered Carbons and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot 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 Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Orion Engineered i.e., Orion Engineered and Cabot go up and down completely randomly.

Pair Corralation between Orion Engineered and Cabot

Considering the 90-day investment horizon Orion Engineered Carbons is expected to under-perform the Cabot. In addition to that, Orion Engineered is 1.41 times more volatile than Cabot. It trades about -0.1 of its total potential returns per unit of risk. Cabot is currently generating about -0.07 per unit of volatility. If you would invest  9,122  in Cabot on December 27, 2024 and sell it today you would lose (708.00) from holding Cabot or give up 7.76% of portfolio value over 90 days.

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

Orion Engineered Carbons  vs.  Cabot

Orion Engineered Carbons

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cabot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Orion Engineered and Cabot

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

The idea behind Orion Engineered Carbons and Cabot 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.