Correlation Between Pacific Basin and Orient Overseas
Can any of the company-specific risk be diversified away by investing in both Pacific Basin 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 Pacific Basin and Orient Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Basin Shipping and Orient Overseas International, you can compare the effects of market volatilities on Pacific Basin 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 Pacific Basin with a short position of Orient Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Basin and Orient Overseas.
Diversification Opportunities for Pacific Basin and Orient Overseas
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pacific and Orient is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and Orient Overseas International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas Inte and Pacific Basin 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 Pacific Basin Shipping 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 Inte has no effect on the direction of Pacific Basin i.e., Pacific Basin and Orient Overseas go up and down completely randomly.
Pair Corralation between Pacific Basin and Orient Overseas
Assuming the 90 days horizon Pacific Basin Shipping is expected to generate 1.58 times more return on investment than Orient Overseas. However, Pacific Basin is 1.58 times more volatile than Orient Overseas International. It trades about -0.02 of its potential returns per unit of risk. Orient Overseas International is currently generating about -0.04 per unit of risk. If you would invest 506.00 in Pacific Basin Shipping on August 31, 2024 and sell it today you would lose (14.00) from holding Pacific Basin Shipping or give up 2.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacific Basin Shipping vs. Orient Overseas International
Performance |
| Timeline |
| Pacific Basin Shipping |
| Orient Overseas Inte |
Pacific Basin and Orient Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Basin and Orient Overseas
The main advantage of trading using opposite Pacific Basin and Orient Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Basin 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.| Pacific Basin vs. Kawasaki Kisen Kaisha | Pacific Basin vs. Hapag Lloyd Aktiengesellschaft | Pacific Basin vs. Hapag Lloyd Aktiengesellschaft | Pacific Basin vs. SITC International Holdings |
| Orient Overseas vs. Hapag Lloyd Aktiengesellschaft | Orient Overseas vs. Hapag Lloyd Aktiengesellschaft | Orient Overseas vs. AP Moeller Maersk AS | Orient Overseas vs. AP Mller |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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