Correlation Between Superior Plus and Orient Overseas

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

By analyzing existing cross correlation between Superior Plus Corp and Orient Overseas Limited, you can compare the effects of market volatilities on Superior Plus 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 Superior Plus with a short position of Orient Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Orient Overseas.

Diversification Opportunities for Superior Plus and Orient Overseas

-0.36

Correlation Coefficient

Superior Plus  Orient Overseas

Very good diversification

The 3 months correlation between Superior and Orient is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas and Superior Plus 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 Superior Plus Corp 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 Superior Plus i.e., Superior Plus and Orient Overseas go up and down completely randomly.

Pair Corralation between Superior Plus and Orient Overseas

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Orient Overseas. But the stock apears to be less risky and, when comparing its historical volatility, Superior Plus Corp is 2.04 times less risky than Orient Overseas. The stock trades about -0.04 of its potential returns per unit of risk. The Orient Overseas Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  613.00  in Orient Overseas Limited on October 8, 2024 and sell it today you would earn a total of  859.00  from holding Orient Overseas Limited or generate 140.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Superior Plus Corp  vs.  Orient Overseas Limited

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Orient Overseas

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Overseas Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Orient Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Superior Plus and Orient Overseas

The main advantage of trading using opposite Superior Plus and Orient Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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 Superior Plus Corp 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.