Correlation Between Orion Engineered and NewMarket

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

Diversification Opportunities for Orion Engineered and NewMarket

-0.34

Correlation Coefficient

Orion Engineered  NewMarket

Very good diversification

The 3 months correlation between Orion and NewMarket is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Orion Engineered Carbons and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket 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 NewMarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMarket has no effect on the direction of Orion Engineered i.e., Orion Engineered and NewMarket go up and down completely randomly.

Pair Corralation between Orion Engineered and NewMarket

Considering the 90-day investment horizon Orion Engineered Carbons is expected to under-perform the NewMarket. In addition to that, Orion Engineered is 1.35 times more volatile than NewMarket. It trades about -0.08 of its total potential returns per unit of risk. NewMarket is currently generating about 0.06 per unit of volatility. If you would invest  52,937  in NewMarket on December 29, 2024 and sell it today you would earn a total of  2,916  from holding NewMarket or generate 5.51% return on investment over 90 days.

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

Orion Engineered Carbons  vs.  NewMarket

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 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.

NewMarket

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NewMarket are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, NewMarket may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Orion Engineered and NewMarket

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

The idea behind Orion Engineered Carbons and NewMarket 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..