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

-0.13

Correlation Coefficient

Amazon  Orient Overseas

Good diversification

The 3 months correlation between Amazon and Orient is -0.13. 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 under-perform the Orient Overseas. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.06 times less risky than Orient Overseas. The stock trades about -0.12 of its potential returns per unit of risk. The Orient Overseas Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Orient Overseas Limited on December 29, 2024 and sell it today you would earn a total of  22.00  from holding Orient Overseas Limited or generate 1.52% return on investment over 90 days.

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

Amazon Inc  vs.  Orient Overseas Limited

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Orient Overseas

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Overseas Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Orient Overseas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.