Correlation Between 5E Advanced and Orion Engineered

Can any of the company-specific risk be diversified away by investing in both 5E Advanced 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 5E Advanced and Orion Engineered into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 5E Advanced Materials and Orion Engineered Carbons, you can compare the effects of market volatilities on 5E Advanced 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 5E Advanced with a short position of Orion Engineered. Check out your portfolio center. Please also check ongoing floating volatility patterns of 5E Advanced and Orion Engineered.

Diversification Opportunities for 5E Advanced and Orion Engineered

0.02

Correlation Coefficient

5E Advanced  Orion Engineered

Significant diversification

The 3 months correlation between FEAM and Orion is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding 5E Advanced Materials 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 5E Advanced 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 5E Advanced Materials 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 5E Advanced i.e., 5E Advanced and Orion Engineered go up and down completely randomly.

Pair Corralation between 5E Advanced and Orion Engineered

Given the investment horizon of 90 days 5E Advanced Materials is expected to under-perform the Orion Engineered. In addition to that, 5E Advanced is 2.29 times more volatile than Orion Engineered Carbons. It trades about -0.07 of its total potential returns per unit of risk. Orion Engineered Carbons is currently generating about 0.02 per unit of volatility. If you would invest  1,758  in Orion Engineered Carbons on September 5, 2024 and sell it today you would earn a total of  142.00  from holding Orion Engineered Carbons or generate 8.08% return on investment over 90 days.

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

5E Advanced Materials  vs.  Orion Engineered Carbons

5E Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 5E Advanced Materials 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Orion Engineered Carbons

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orion Engineered Carbons are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Orion Engineered exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 5E Advanced and Orion Engineered

The main advantage of trading using opposite 5E Advanced and Orion Engineered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 5E Advanced 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 5E Advanced Materials 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.