Correlation Between Orion Engineered and Gevo

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

Diversification Opportunities for Orion Engineered and Gevo

0.41

Correlation Coefficient

Orion Engineered  Gevo

Very weak diversification

The 3 months correlation between Orion and Gevo is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Orion Engineered Carbons and Gevo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gevo Inc 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 Gevo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gevo Inc has no effect on the direction of Orion Engineered i.e., Orion Engineered and Gevo go up and down completely randomly.

Pair Corralation between Orion Engineered and Gevo

Considering the 90-day investment horizon Orion Engineered Carbons is expected to under-perform the Gevo. But the stock apears to be less risky and, when comparing its historical volatility, Orion Engineered Carbons is 3.14 times less risky than Gevo. The stock trades about -0.1 of its potential returns per unit of risk. The Gevo Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  151.00  in Gevo Inc on December 24, 2024 and sell it today you would lose (20.00) from holding Gevo Inc or give up 13.25% of portfolio value over 90 days.

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

Orion Engineered Carbons  vs.  Gevo Inc

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.

Gevo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gevo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Gevo is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Orion Engineered and Gevo

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

The idea behind Orion Engineered Carbons and Gevo Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.