Correlation Between Oversea Chinese and Realord Group

Can any of the company-specific risk be diversified away by investing in both Oversea Chinese and Realord Group 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 and Realord Group 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 Realord Group Holdings, you can compare the effects of market volatilities on Oversea Chinese and Realord Group 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 with a short position of Realord Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oversea Chinese and Realord Group.

Diversification Opportunities for Oversea Chinese and Realord Group

0.35

Correlation Coefficient

Oversea Chinese  Realord Group

Weak diversification

The 3 months correlation between Oversea and Realord is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Oversea Chinese Banking and Realord Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realord Group Holdings and Oversea Chinese 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 Realord Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realord Group Holdings has no effect on the direction of Oversea Chinese i.e., Oversea Chinese and Realord Group go up and down completely randomly.

Pair Corralation between Oversea Chinese and Realord Group

Assuming the 90 days trading horizon Oversea Chinese Banking is expected to generate 0.87 times more return on investment than Realord Group. However, Oversea Chinese Banking is 1.15 times less risky than Realord Group. It trades about 0.06 of its potential returns per unit of risk. Realord Group Holdings is currently generating about -0.05 per unit of risk. If you would invest  1,157  in Oversea Chinese Banking on December 27, 2024 and sell it today you would earn a total of  46.00  from holding Oversea Chinese Banking or generate 3.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Oversea Chinese Banking  vs.  Realord Group Holdings

Oversea Chinese Banking

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oversea Chinese Banking are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Oversea Chinese is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Realord Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Realord Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Realord Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Oversea Chinese and Realord Group

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

The idea behind Oversea Chinese Banking and Realord Group Holdings 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.