Correlation Between Orica and Minerals Technologies

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

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

Diversification Opportunities for Orica and Minerals Technologies

-0.68

Correlation Coefficient

Orica  Minerals Technologies

Excellent diversification

The 3 months correlation between Orica and Minerals is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Orica Limited and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of Orica i.e., Orica and Minerals Technologies go up and down completely randomly.

Pair Corralation between Orica and Minerals Technologies

Assuming the 90 days horizon Orica Limited is expected to generate 1.12 times more return on investment than Minerals Technologies. However, Orica is 1.12 times more volatile than Minerals Technologies. It trades about 0.05 of its potential returns per unit of risk. Minerals Technologies is currently generating about 0.04 per unit of risk. If you would invest  855.00  in Orica Limited on September 14, 2024 and sell it today you would earn a total of  205.00  from holding Orica Limited or generate 23.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	59.72%
Values	Daily Returns

Orica Limited  vs.  Minerals Technologies

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.

Minerals Technologies

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Minerals Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Orica and Minerals Technologies

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

The idea behind Orica Limited and Minerals Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.