Correlation Between Western Bulk and Orient Overseas
Can any of the company-specific risk be diversified away by investing in both Western Bulk 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 Western Bulk and Orient Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Bulk Chartering and Orient Overseas Limited, you can compare the effects of market volatilities on Western Bulk 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 Western Bulk with a short position of Orient Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Bulk and Orient Overseas.
Diversification Opportunities for Western Bulk and Orient Overseas
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Orient is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Western Bulk Chartering and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas and Western Bulk 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 Western Bulk Chartering 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 Western Bulk i.e., Western Bulk and Orient Overseas go up and down completely randomly.
Pair Corralation between Western Bulk and Orient Overseas
Assuming the 90 days horizon Western Bulk Chartering is expected to under-perform the Orient Overseas. In addition to that, Western Bulk is 16.01 times more volatile than Orient Overseas Limited. It trades about -0.25 of its total potential returns per unit of risk. Orient Overseas Limited is currently generating about 0.21 per unit of volatility. If you would invest 1,370 in Orient Overseas Limited on August 29, 2024 and sell it today you would earn a total of 26.00 from holding Orient Overseas Limited or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Bulk Chartering vs. Orient Overseas Limited
Performance |
| Timeline |
| Western Bulk Chartering |
| Orient Overseas |
Western Bulk and Orient Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Bulk and Orient Overseas
The main advantage of trading using opposite Western Bulk and Orient Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Bulk 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 Western Bulk Chartering 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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