Correlation Between Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1
Can any of the company-specific risk be diversified away by investing in both Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1 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 Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oversea Chinese Banking and POSBO UNSPADRS20YC1, you can compare the effects of market volatilities on Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1 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 Oversea-Chinese BankingLimited with a short position of POSBO UNSPADRS/20YC1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1.
Diversification Opportunities for Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oversea-Chinese and POSBO is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Oversea Chinese Banking and POSBO UNSPADRS20YC1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSBO UNSPADRS/20YC1 and Oversea-Chinese BankingLimited 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 Oversea Chinese Banking are associated (or correlated) with POSBO UNSPADRS/20YC1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSBO UNSPADRS/20YC1 has no effect on the direction of Oversea-Chinese BankingLimited i.e., Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1 go up and down completely randomly.
Pair Corralation between Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1
Assuming the 90 days trading horizon Oversea Chinese Banking is expected to generate 1.09 times more return on investment than POSBO UNSPADRS/20YC1. However, Oversea-Chinese BankingLimited is 1.09 times more volatile than POSBO UNSPADRS20YC1. It trades about 0.12 of its potential returns per unit of risk. POSBO UNSPADRS20YC1 is currently generating about 0.06 per unit of risk. If you would invest 1,189 in Oversea Chinese Banking on November 7, 2024 and sell it today you would earn a total of 41.00 from holding Oversea Chinese Banking or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Oversea Chinese Banking vs. POSBO UNSPADRS20YC1
Performance |
| Timeline |
| Oversea-Chinese BankingLimited |
| POSBO UNSPADRS/20YC1 |
Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1
The main advantage of trading using opposite Oversea-Chinese BankingLimited and POSBO UNSPADRS/20YC1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oversea-Chinese BankingLimited position performs unexpectedly, POSBO UNSPADRS/20YC1 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 POSBO UNSPADRS/20YC1 will offset losses from the drop in POSBO UNSPADRS/20YC1's long position.The idea behind Oversea Chinese Banking and POSBO UNSPADRS20YC1 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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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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