Correlation Between Orient Overseas and BW LPG

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

Diversification Opportunities for Orient Overseas and BW LPG

-0.25

Correlation Coefficient

Orient Overseas  BW LPG

Very good diversification

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

Pair Corralation between Orient Overseas and BW LPG

Assuming the 90 days horizon Orient Overseas Limited is expected to generate 1.69 times more return on investment than BW LPG. However, Orient Overseas is 1.69 times more volatile than BW LPG. It trades about 0.07 of its potential returns per unit of risk. BW LPG is currently generating about 0.07 per unit of risk. If you would invest  1,700  in Orient Overseas Limited on October 22, 2024 and sell it today you would lose (234.00) from holding Orient Overseas Limited or give up 13.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.62%
Values	Daily Returns

Orient Overseas Limited  vs.  BW LPG

Orient Overseas

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Overseas Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Orient Overseas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BW LPG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW LPG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, BW LPG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orient Overseas and BW LPG

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

The idea behind Orient Overseas Limited and BW LPG 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.