Correlation Between Amazon and Orient Overseas
Can any of the company-specific risk be diversified away by investing in both Amazon and Orient Overseas 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 Amazon and Orient Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Orient Overseas Limited, you can compare the effects of market volatilities on Amazon and Orient Overseas 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 Amazon with a short position of Orient Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Orient Overseas.
Diversification Opportunities for Amazon and Orient Overseas
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and Orient is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas and Amazon 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 Amazon Inc are associated (or correlated) with Orient Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Overseas has no effect on the direction of Amazon i.e., Amazon and Orient Overseas go up and down completely randomly.
Pair Corralation between Amazon and Orient Overseas
Given the investment horizon of 90 days Amazon Inc is expected to generate 5.91 times more return on investment than Orient Overseas. However, Amazon is 5.91 times more volatile than Orient Overseas Limited. It trades about 0.15 of its potential returns per unit of risk. Orient Overseas Limited is currently generating about 0.21 per unit of risk. If you would invest 19,083 in Amazon Inc on August 30, 2024 and sell it today you would earn a total of 1,491 from holding Amazon Inc or generate 7.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Orient Overseas Limited
Performance |
| Timeline |
| Amazon Inc |
| Orient Overseas |
Amazon and Orient Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Orient Overseas
The main advantage of trading using opposite Amazon and Orient Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Orient Overseas 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 Orient Overseas will offset losses from the drop in Orient Overseas' long position.The idea behind Amazon Inc and Orient Overseas 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.| Orient Overseas vs. SITC International Holdings | Orient Overseas vs. COSCO SHIPPING Holdings | Orient Overseas vs. Pacific Basin Shipping | Orient Overseas vs. Mitsui OSK Lines |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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