Correlation Between Texas Rare and Orica

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

By analyzing existing cross correlation between Texas Rare Earth and Orica Limited, you can compare the effects of market volatilities on Texas Rare 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 Texas Rare with a short position of Orica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Rare and Orica.

Diversification Opportunities for Texas Rare and Orica

0.23

Correlation Coefficient

Texas Rare  Orica

Modest diversification

The 3 months correlation between Texas and Orica is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Texas Rare Earth and Orica Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orica Limited and Texas Rare 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 Texas Rare Earth 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 Texas Rare i.e., Texas Rare and Orica go up and down completely randomly.

Pair Corralation between Texas Rare and Orica

Given the investment horizon of 90 days Texas Rare is expected to generate 1.58 times less return on investment than Orica. In addition to that, Texas Rare is 2.11 times more volatile than Orica Limited. It trades about 0.04 of its total potential returns per unit of risk. Orica Limited is currently generating about 0.13 per unit of volatility. If you would invest  960.00  in Orica Limited on May 7, 2025 and sell it today you would earn a total of  265.00  from holding Orica Limited or generate 27.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Texas Rare Earth  vs.  Orica Limited

Texas Rare Earth

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Rare Earth are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Texas Rare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Orica Limited

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Orica Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Orica reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Rare and Orica

The main advantage of trading using opposite Texas Rare and Orica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Rare 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 Texas Rare Earth 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.