Correlation Between Albemarle Corp and Orica

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

By analyzing existing cross correlation between Albemarle Corp and Orica Limited, you can compare the effects of market volatilities on Albemarle Corp and Orica 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 Albemarle Corp with a short position of Orica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle Corp and Orica.

Diversification Opportunities for Albemarle Corp and Orica

-0.78

Correlation Coefficient

Albemarle Corp  Orica

Pay attention - limited upside

The 3 months correlation between Albemarle and Orica is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle Corp and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited and Albemarle Corp 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 Albemarle Corp are associated (or correlated) with Orica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orica Limited has no effect on the direction of Albemarle Corp i.e., Albemarle Corp and Orica go up and down completely randomly.

Pair Corralation between Albemarle Corp and Orica

Considering the 90-day investment horizon Albemarle Corp is expected to generate 10.01 times more return on investment than Orica. However, Albemarle Corp is 10.01 times more volatile than Orica Limited. It trades about 0.09 of its potential returns per unit of risk. Orica Limited is currently generating about -0.13 per unit of risk. If you would invest  8,984  in Albemarle Corp on August 30, 2024 and sell it today you would earn a total of  1,814  from holding Albemarle Corp or generate 20.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Albemarle Corp  vs.  Orica Limited

Albemarle Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Albemarle Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Orica Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orica Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Orica is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Albemarle Corp and Orica

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

The idea behind Albemarle Corp and Orica Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.