Correlation Between Orica and Iofina Plc

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

By analyzing existing cross correlation between Orica Limited and Iofina plc, you can compare the effects of market volatilities on Orica and Iofina Plc 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 Iofina Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orica and Iofina Plc.

Diversification Opportunities for Orica and Iofina Plc

0.71

Correlation Coefficient

Orica  Iofina Plc

Poor diversification

The 3 months correlation between Orica and Iofina is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Orica Limited and Iofina plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iofina plc 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 Iofina Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iofina plc has no effect on the direction of Orica i.e., Orica and Iofina Plc go up and down completely randomly.

Pair Corralation between Orica and Iofina Plc

Assuming the 90 days horizon Orica Limited is expected to generate 0.14 times more return on investment than Iofina Plc. However, Orica Limited is 7.2 times less risky than Iofina Plc. It trades about -0.13 of its potential returns per unit of risk. Iofina plc is currently generating about -0.14 per unit of risk. If you would invest  1,093  in Orica Limited on September 13, 2024 and sell it today you would lose (33.00) from holding Orica Limited or give up 3.02% of portfolio value over 90 days.

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

Orica Limited  vs.  Iofina plc

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Iofina plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iofina plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Orica and Iofina Plc

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

The idea behind Orica Limited and Iofina plc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.