Correlation Between Quaker Chemical and Orion Engineered

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

By analyzing existing cross correlation between Quaker Chemical and Orion Engineered Carbons, you can compare the effects of market volatilities on Quaker Chemical and Orion Engineered 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 Quaker Chemical with a short position of Orion Engineered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quaker Chemical and Orion Engineered.

Diversification Opportunities for Quaker Chemical and Orion Engineered

-0.13

Correlation Coefficient

Quaker Chemical  Orion Engineered

Good diversification

The 3 months correlation between Quaker and Orion is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and Orion Engineered Carbons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Engineered Carbons and Quaker Chemical 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 Quaker Chemical are associated (or correlated) with Orion Engineered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Engineered Carbons has no effect on the direction of Quaker Chemical i.e., Quaker Chemical and Orion Engineered go up and down completely randomly.

Pair Corralation between Quaker Chemical and Orion Engineered

Considering the 90-day investment horizon Quaker Chemical is expected to under-perform the Orion Engineered. But the stock apears to be less risky and, when comparing its historical volatility, Quaker Chemical is 1.07 times less risky than Orion Engineered. The stock trades about -0.15 of its potential returns per unit of risk. The Orion Engineered Carbons is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,409  in Orion Engineered Carbons on February 4, 2024 and sell it today you would lose (49.00) from holding Orion Engineered Carbons or give up 2.03% of portfolio value over 90 days.

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

Quaker Chemical  vs.  Orion Engineered Carbons

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Quaker Chemical is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Orion Engineered Carbons

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Orion Engineered Carbons are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Orion Engineered may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Quaker Chemical and Orion Engineered

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

The idea behind Quaker Chemical and Orion Engineered Carbons 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.