Correlation Between Mitsui OSK and Orient Overseas

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

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

Diversification Opportunities for Mitsui OSK and Orient Overseas

-0.04

Correlation Coefficient

Mitsui OSK  Orient Overseas

Good diversification

The 3 months correlation between Mitsui and Orient is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui OSK Lines and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas and Mitsui OSK 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 Mitsui OSK Lines 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 Mitsui OSK i.e., Mitsui OSK and Orient Overseas go up and down completely randomly.

Pair Corralation between Mitsui OSK and Orient Overseas

Assuming the 90 days horizon Mitsui OSK Lines is expected to generate 1.37 times more return on investment than Orient Overseas. However, Mitsui OSK is 1.37 times more volatile than Orient Overseas Limited. It trades about -0.01 of its potential returns per unit of risk. Orient Overseas Limited is currently generating about -0.03 per unit of risk. If you would invest  1,750  in Mitsui OSK Lines on September 2, 2024 and sell it today you would lose (44.00) from holding Mitsui OSK Lines or give up 2.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Mitsui OSK Lines  vs.  Orient Overseas Limited

Mitsui OSK Lines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui OSK Lines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mitsui OSK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Orient Overseas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orient Overseas Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Mitsui OSK and Orient Overseas

The main advantage of trading using opposite Mitsui OSK and Orient Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui OSK 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 Mitsui OSK Lines 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.