Correlation Between Quaker Chemical and Orica

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

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

Diversification Opportunities for Quaker Chemical and Orica

0.32

Correlation Coefficient

Quaker Chemical  Orica

Weak diversification

The 3 months correlation between Quaker and Orica is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited and Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical i.e., Quaker Chemical and Orica go up and down completely randomly.

Pair Corralation between Quaker Chemical and Orica

Considering the 90-day investment horizon Quaker Chemical is expected to under-perform the Orica. But the stock apears to be less risky and, when comparing its historical volatility, Quaker Chemical is 1.06 times less risky than Orica. The stock trades about -0.06 of its potential returns per unit of risk. The Orica Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,015  in Orica Limited on September 14, 2024 and sell it today you would earn a total of  45.00  from holding Orica Limited or generate 4.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	60.64%
Values	Daily Returns

Quaker Chemical  vs.  Orica Limited

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 Quaker Chemical and Orica

The main advantage of trading using opposite Quaker Chemical and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quaker Chemical 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 Quaker Chemical 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.