Correlation Between Element Solutions and Orion Engineered

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

By analyzing existing cross correlation between Element Solutions and Orion Engineered Carbons, you can compare the effects of market volatilities on Element Solutions and Orion Engineered 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 Element Solutions with a short position of Orion Engineered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Solutions and Orion Engineered.

Diversification Opportunities for Element Solutions and Orion Engineered

0.21

Correlation Coefficient

Element Solutions  Orion Engineered

Modest diversification

The 3 months correlation between Element and Orion is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and Orion Engineered Carbons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Engineered Carbons and Element Solutions 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 Element Solutions are associated (or correlated) with Orion Engineered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Engineered Carbons has no effect on the direction of Element Solutions i.e., Element Solutions and Orion Engineered go up and down completely randomly.

Pair Corralation between Element Solutions and Orion Engineered

Considering the 90-day investment horizon Element Solutions is expected to generate 0.6 times more return on investment than Orion Engineered. However, Element Solutions is 1.67 times less risky than Orion Engineered. It trades about 0.1 of its potential returns per unit of risk. Orion Engineered Carbons is currently generating about 0.03 per unit of risk. If you would invest  2,568  in Element Solutions on September 2, 2024 and sell it today you would earn a total of  300.00  from holding Element Solutions or generate 11.68% return on investment over 90 days.

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

Element Solutions  vs.  Orion Engineered Carbons

Element Solutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Element Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Element Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Orion Engineered Carbons

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orion Engineered Carbons are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Orion Engineered may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Element Solutions and Orion Engineered

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

The idea behind Element Solutions and Orion Engineered Carbons 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.