Correlation Between COSCO SHIPPING and Orient Overseas

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

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

Diversification Opportunities for COSCO SHIPPING and Orient Overseas

0.46

Correlation Coefficient

COSCO SHIPPING  Orient Overseas

Very weak diversification

The 3 months correlation between COSCO and Orient is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding COSCO SHIPPING Holdings and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas and COSCO SHIPPING 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 COSCO SHIPPING Holdings 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 COSCO SHIPPING i.e., COSCO SHIPPING and Orient Overseas go up and down completely randomly.

Pair Corralation between COSCO SHIPPING and Orient Overseas

Assuming the 90 days horizon COSCO SHIPPING Holdings is expected to generate 1.19 times more return on investment than Orient Overseas. However, COSCO SHIPPING is 1.19 times more volatile than Orient Overseas Limited. It trades about 0.06 of its potential returns per unit of risk. Orient Overseas Limited is currently generating about 0.05 per unit of risk. If you would invest  138.00  in COSCO SHIPPING Holdings on October 14, 2024 and sell it today you would earn a total of  10.00  from holding COSCO SHIPPING Holdings or generate 7.25% return on investment over 90 days.

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

COSCO SHIPPING Holdings  vs.  Orient Overseas Limited

COSCO SHIPPING Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COSCO SHIPPING Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COSCO SHIPPING may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Orient Overseas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Overseas Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Orient Overseas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with COSCO SHIPPING and Orient Overseas

The main advantage of trading using opposite COSCO SHIPPING and Orient Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSCO SHIPPING 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 COSCO SHIPPING Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.