Correlation Between HydroGraph Clean and Orica

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

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

Diversification Opportunities for HydroGraph Clean and Orica

0.61

Correlation Coefficient

HydroGraph Clean  Orica

Poor diversification

The 3 months correlation between HydroGraph and Orica is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HydroGraph Clean Power and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited and HydroGraph Clean 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 HydroGraph Clean Power 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 HydroGraph Clean i.e., HydroGraph Clean and Orica go up and down completely randomly.

Pair Corralation between HydroGraph Clean and Orica

Assuming the 90 days horizon HydroGraph Clean Power is expected to generate 18.25 times more return on investment than Orica. However, HydroGraph Clean is 18.25 times more volatile than Orica Limited. It trades about 0.12 of its potential returns per unit of risk. Orica Limited is currently generating about -0.13 per unit of risk. If you would invest  8.56  in HydroGraph Clean Power on September 14, 2024 and sell it today you would earn a total of  1.44  from holding HydroGraph Clean Power or generate 16.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	42.86%
Values	Daily Returns

HydroGraph Clean Power  vs.  Orica Limited

HydroGraph Clean Power

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days HydroGraph Clean Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, HydroGraph Clean reported 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HydroGraph Clean and Orica

The main advantage of trading using opposite HydroGraph Clean and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HydroGraph Clean 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 HydroGraph Clean Power 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.