Correlation Between Orion Engineered and Flexible Solutions

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

Diversification Opportunities for Orion Engineered and Flexible Solutions

-0.47

Correlation Coefficient

Orion Engineered  Flexible Solutions

Very good diversification

The 3 months correlation between Orion and Flexible is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Orion Engineered Carbons and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Orion Engineered i.e., Orion Engineered and Flexible Solutions go up and down completely randomly.

Pair Corralation between Orion Engineered and Flexible Solutions

Considering the 90-day investment horizon Orion Engineered Carbons is expected to under-perform the Flexible Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Orion Engineered Carbons is 3.46 times less risky than Flexible Solutions. The stock trades about -0.11 of its potential returns per unit of risk. The Flexible Solutions International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  361.00  in Flexible Solutions International on December 28, 2024 and sell it today you would earn a total of  133.00  from holding Flexible Solutions International or generate 36.84% return on investment over 90 days.

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

Orion Engineered Carbons  vs.  Flexible Solutions Internation

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.

Flexible Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orion Engineered and Flexible Solutions

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

The idea behind Orion Engineered Carbons and Flexible Solutions International 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.