Correlation Between Orient Overseas and X FAB

Can any of the company-specific risk be diversified away by investing in both Orient Overseas and X FAB 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 X FAB 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 X FAB Silicon Foundries, you can compare the effects of market volatilities on Orient Overseas and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orient Overseas and X FAB.

Diversification Opportunities for Orient Overseas and X FAB

0.26

Correlation Coefficient

Orient Overseas  X FAB

Modest diversification

The 3 months correlation between Orient and XFB is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Orient Overseas Limited and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Orient Overseas i.e., Orient Overseas and X FAB go up and down completely randomly.

Pair Corralation between Orient Overseas and X FAB

Assuming the 90 days trading horizon Orient Overseas Limited is expected to under-perform the X FAB. But the stock apears to be less risky and, when comparing its historical volatility, Orient Overseas Limited is 1.47 times less risky than X FAB. The stock trades about -0.15 of its potential returns per unit of risk. The X FAB Silicon Foundries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  501.00  in X FAB Silicon Foundries on October 26, 2024 and sell it today you would lose (2.00) from holding X FAB Silicon Foundries or give up 0.4% of portfolio value over 90 days.

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

Orient Overseas Limited  vs.  X FAB Silicon Foundries

Orient Overseas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Overseas Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Orient Overseas is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

X FAB Silicon

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, X FAB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Orient Overseas and X FAB

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

The idea behind Orient Overseas Limited and X FAB Silicon Foundries 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.