Correlation Between Orient Overseas and HAMMONIA Schiffsholding

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

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

Diversification Opportunities for Orient Overseas and HAMMONIA Schiffsholding

0.25

Correlation Coefficient

Orient Overseas  HAMMONIA Schiffsholding

Modest diversification

The 3 months correlation between Orient and HAMMONIA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Orient Overseas Limited and HAMMONIA Schiffsholding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HAMMONIA Schiffsholding and Orient Overseas 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 Orient Overseas Limited are associated (or correlated) with HAMMONIA Schiffsholding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HAMMONIA Schiffsholding has no effect on the direction of Orient Overseas i.e., Orient Overseas and HAMMONIA Schiffsholding go up and down completely randomly.

Pair Corralation between Orient Overseas and HAMMONIA Schiffsholding

Assuming the 90 days trading horizon Orient Overseas Limited is expected to generate 0.77 times more return on investment than HAMMONIA Schiffsholding. However, Orient Overseas Limited is 1.3 times less risky than HAMMONIA Schiffsholding. It trades about 0.1 of its potential returns per unit of risk. HAMMONIA Schiffsholding AG is currently generating about -0.09 per unit of risk. If you would invest  1,267  in Orient Overseas Limited on September 25, 2024 and sell it today you would earn a total of  47.00  from holding Orient Overseas Limited or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Orient Overseas Limited  vs.  HAMMONIA Schiffsholding AG

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 January 2025.

HAMMONIA Schiffsholding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HAMMONIA Schiffsholding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, HAMMONIA Schiffsholding is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Orient Overseas and HAMMONIA Schiffsholding

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

The idea behind Orient Overseas Limited and HAMMONIA Schiffsholding AG 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.