Correlation Between Tronox Holdings and Olin

Can any of the company-specific risk be diversified away by investing in both Tronox Holdings and Olin 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 Tronox Holdings and Olin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tronox Holdings PLC and Olin Corporation, you can compare the effects of market volatilities on Tronox Holdings and Olin 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 Tronox Holdings with a short position of Olin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tronox Holdings and Olin.

Diversification Opportunities for Tronox Holdings and Olin

0.87

Correlation Coefficient

Tronox Holdings  Olin

Very poor diversification

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

Pair Corralation between Tronox Holdings and Olin

Given the investment horizon of 90 days Tronox Holdings PLC is expected to under-perform the Olin. In addition to that, Tronox Holdings is 1.23 times more volatile than Olin Corporation. It trades about -0.15 of its total potential returns per unit of risk. Olin Corporation is currently generating about -0.17 per unit of volatility. If you would invest  3,350  in Olin Corporation on December 27, 2024 and sell it today you would lose (874.00) from holding Olin Corporation or give up 26.09% of portfolio value over 90 days.

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

Tronox Holdings PLC  vs.  Olin Corp.

Tronox Holdings PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tronox Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Olin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Olin Corporation 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 essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Tronox Holdings and Olin

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

The idea behind Tronox Holdings PLC and Olin Corporation 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.