Correlation Between Snap and Orica
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Orica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Orica Limited, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Orica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Orica.
Diversification Opportunities for Snap and Orica
Excellent diversification
The 3 months correlation between Snap and Orica is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited and Snap 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 Snap Inc 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 Snap i.e., Snap and Orica go up and down completely randomly.
Pair Corralation between Snap and Orica
Given the investment horizon of 90 days Snap Inc is expected to generate 1.97 times more return on investment than Orica. However, Snap is 1.97 times more volatile than Orica Limited. It trades about 0.03 of its potential returns per unit of risk. Orica Limited is currently generating about 0.05 per unit of risk. If you would invest 1,010 in Snap Inc on August 26, 2024 and sell it today you would earn a total of 132.00 from holding Snap Inc or generate 13.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 59.96% |
| Values | Daily Returns |
Snap Inc vs. Orica Limited
Performance |
| Timeline |
| Snap Inc |
| Orica Limited |
Snap and Orica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Orica
The main advantage of trading using opposite Snap and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc 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.| Orica vs. Johnson Matthey PLC | Orica vs. Flexible Solutions International | Orica vs. Orica Ltd ADR | Orica vs. Iofina plc |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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