Correlation Between OVERSEA CHINUNSPADR/2 and POSBO UNSPADRS/20YC1

Can any of the company-specific risk be diversified away by investing in both OVERSEA CHINUNSPADR/2 and POSBO UNSPADRS/20YC1 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 CHINUNSPADR/2 and POSBO UNSPADRS/20YC1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OVERSEA CHINUNSPADR2 and POSBO UNSPADRS20YC1, you can compare the effects of market volatilities on OVERSEA CHINUNSPADR/2 and POSBO UNSPADRS/20YC1 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 CHINUNSPADR/2 with a short position of POSBO UNSPADRS/20YC1. Check out your portfolio center. Please also check ongoing floating volatility patterns of OVERSEA CHINUNSPADR/2 and POSBO UNSPADRS/20YC1.

Diversification Opportunities for OVERSEA CHINUNSPADR/2 and POSBO UNSPADRS/20YC1

-0.13

Correlation Coefficient

OVERSEA CHINUNSPADR/2  POSBO UNSPADRS/20YC1

Good diversification

The 3 months correlation between OVERSEA and POSBO is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding OVERSEA CHINUNSPADR2 and POSBO UNSPADRS20YC1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSBO UNSPADRS/20YC1 and OVERSEA CHINUNSPADR/2 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 CHINUNSPADR2 are associated (or correlated) with POSBO UNSPADRS/20YC1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSBO UNSPADRS/20YC1 has no effect on the direction of OVERSEA CHINUNSPADR/2 i.e., OVERSEA CHINUNSPADR/2 and POSBO UNSPADRS/20YC1 go up and down completely randomly.

Pair Corralation between OVERSEA CHINUNSPADR/2 and POSBO UNSPADRS/20YC1

If you would invest  1,502  in OVERSEA CHINUNSPADR2 on December 28, 2024 and sell it today you would earn a total of  858.00  from holding OVERSEA CHINUNSPADR2 or generate 57.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

OVERSEA CHINUNSPADR2  vs.  POSBO UNSPADRS20YC1

OVERSEA CHINUNSPADR/2

Risk-Adjusted Performance

Insignificant

Over the last 90 days OVERSEA CHINUNSPADR2 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, OVERSEA CHINUNSPADR/2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

POSBO UNSPADRS/20YC1

Risk-Adjusted Performance

Good

Over the last 90 days POSBO UNSPADRS20YC1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak fundamental drivers, POSBO UNSPADRS/20YC1 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with OVERSEA CHINUNSPADR/2 and POSBO UNSPADRS/20YC1

The main advantage of trading using opposite OVERSEA CHINUNSPADR/2 and POSBO UNSPADRS/20YC1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OVERSEA CHINUNSPADR/2 position performs unexpectedly, POSBO UNSPADRS/20YC1 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 POSBO UNSPADRS/20YC1 will offset losses from the drop in POSBO UNSPADRS/20YC1's long position.

The idea behind OVERSEA CHINUNSPADR2 and POSBO UNSPADRS20YC1 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.