Correlation Between Orica and Flexible Solutions

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

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

Diversification Opportunities for Orica and Flexible Solutions

-0.64

Correlation Coefficient

Orica  Flexible Solutions

Excellent diversification

The 3 months correlation between Orica and Flexible is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Orica Limited and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions and Orica 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 Orica Limited are associated (or correlated) with Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Orica i.e., Orica and Flexible Solutions go up and down completely randomly.

Pair Corralation between Orica and Flexible Solutions

Assuming the 90 days horizon Orica Limited is expected to under-perform the Flexible Solutions. But the pink sheet apears to be less risky and, when comparing its historical volatility, Orica Limited is 9.14 times less risky than Flexible Solutions. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Flexible Solutions International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  343.00  in Flexible Solutions International on September 14, 2024 and sell it today you would earn a total of  48.00  from holding Flexible Solutions International or generate 13.99% return on investment over 90 days.

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

Orica Limited  vs.  Flexible Solutions Internation

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.

Flexible Solutions

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orica and Flexible Solutions

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

The idea behind Orica Limited and Flexible Solutions International 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.