Correlation Between Oversea-Chinese BankingLimited and WESTERN NEW

Can any of the company-specific risk be diversified away by investing in both Oversea-Chinese BankingLimited and WESTERN NEW 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 Oversea-Chinese BankingLimited and WESTERN NEW into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oversea Chinese Banking and WESTERN NEW ENGL, you can compare the effects of market volatilities on Oversea-Chinese BankingLimited and WESTERN NEW 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 Oversea-Chinese BankingLimited with a short position of WESTERN NEW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oversea-Chinese BankingLimited and WESTERN NEW.

Diversification Opportunities for Oversea-Chinese BankingLimited and WESTERN NEW

0.91

Correlation Coefficient

Oversea-Chinese BankingLimited  WESTERN NEW

Almost no diversification

The 3 months correlation between Oversea-Chinese and WESTERN is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Oversea Chinese Banking and WESTERN NEW ENGL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN NEW ENGL and Oversea-Chinese BankingLimited 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 Oversea Chinese Banking are associated (or correlated) with WESTERN NEW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN NEW ENGL has no effect on the direction of Oversea-Chinese BankingLimited i.e., Oversea-Chinese BankingLimited and WESTERN NEW go up and down completely randomly.

Pair Corralation between Oversea-Chinese BankingLimited and WESTERN NEW

Assuming the 90 days trading horizon Oversea-Chinese BankingLimited is expected to generate 1.39 times less return on investment than WESTERN NEW. But when comparing it to its historical volatility, Oversea Chinese Banking is 1.43 times less risky than WESTERN NEW. It trades about 0.13 of its potential returns per unit of risk. WESTERN NEW ENGL is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  753.00  in WESTERN NEW ENGL on October 8, 2024 and sell it today you would earn a total of  117.00  from holding WESTERN NEW ENGL or generate 15.54% return on investment over 90 days.

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

Oversea Chinese Banking  vs.  WESTERN NEW ENGL

Oversea-Chinese BankingLimited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oversea Chinese Banking are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Oversea-Chinese BankingLimited may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WESTERN NEW ENGL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN NEW ENGL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, WESTERN NEW reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oversea-Chinese BankingLimited and WESTERN NEW

The main advantage of trading using opposite Oversea-Chinese BankingLimited and WESTERN NEW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oversea-Chinese BankingLimited position performs unexpectedly, WESTERN NEW 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 WESTERN NEW will offset losses from the drop in WESTERN NEW's long position.

The idea behind Oversea Chinese Banking and WESTERN NEW ENGL 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.