Correlation Between Olin and Chemours

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

By analyzing existing cross correlation between Olin Corporation and Chemours Co, you can compare the effects of market volatilities on Olin and Chemours 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 Olin with a short position of Chemours. Check out your portfolio center. Please also check ongoing floating volatility patterns of Olin and Chemours.

Diversification Opportunities for Olin and Chemours

-0.35

Correlation Coefficient

Olin  Chemours

Very good diversification

The 3 months correlation between Olin and Chemours is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Olin Corp. and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours and Olin 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 Olin Corporation are associated (or correlated) with Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Olin i.e., Olin and Chemours go up and down completely randomly.

Pair Corralation between Olin and Chemours

Considering the 90-day investment horizon Olin is expected to generate 2.07 times less return on investment than Chemours. But when comparing it to its historical volatility, Olin Corporation is 1.64 times less risky than Chemours. It trades about 0.01 of its potential returns per unit of risk. Chemours Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,106  in Chemours Co on January 31, 2024 and sell it today you would lose (337.00) from holding Chemours Co or give up 10.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

Olin Corp.  vs.  Chemours Co

Olin

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Olin Corporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Olin is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Chemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Chemours is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Olin and Chemours

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

The idea behind Olin Corporation and Chemours Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.