Correlation Between G6 Materials and Orica
Can any of the company-specific risk be diversified away by investing in both G6 Materials 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 G6 Materials and Orica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between G6 Materials Corp and Orica Ltd ADR, you can compare the effects of market volatilities on G6 Materials 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 G6 Materials with a short position of Orica. Check out your portfolio center. Please also check ongoing floating volatility patterns of G6 Materials and Orica.
Diversification Opportunities for G6 Materials and Orica
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GPHBF and Orica is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding G6 Materials Corp and Orica Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Ltd ADR and G6 Materials 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 G6 Materials Corp 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 Ltd ADR has no effect on the direction of G6 Materials i.e., G6 Materials and Orica go up and down completely randomly.
Pair Corralation between G6 Materials and Orica
Assuming the 90 days horizon G6 Materials Corp is expected to generate 3.61 times more return on investment than Orica. However, G6 Materials is 3.61 times more volatile than Orica Ltd ADR. It trades about 0.01 of its potential returns per unit of risk. Orica Ltd ADR is currently generating about -0.01 per unit of risk. If you would invest 5.10 in G6 Materials Corp on September 1, 2024 and sell it today you would lose (2.10) from holding G6 Materials Corp or give up 41.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
G6 Materials Corp vs. Orica Ltd ADR
Performance |
| Timeline |
| G6 Materials Corp |
| Orica Ltd ADR |
G6 Materials and Orica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with G6 Materials and Orica
The main advantage of trading using opposite G6 Materials and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G6 Materials 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.| G6 Materials vs. Sherwin Williams Co | G6 Materials vs. Air Liquide SA | G6 Materials vs. Air Products and | G6 Materials vs. Ecolab Inc |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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