Correlation Between Orient Overseas and Mitsui OSK

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

Diversification Opportunities for Orient Overseas and Mitsui OSK

-0.09

Correlation Coefficient

Orient Overseas  Mitsui OSK

Good diversification

The 3 months correlation between Orient and Mitsui is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Orient Overseas Limited and Mitsui OSK Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui OSK Lines 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 Mitsui OSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui OSK Lines has no effect on the direction of Orient Overseas i.e., Orient Overseas and Mitsui OSK go up and down completely randomly.

Pair Corralation between Orient Overseas and Mitsui OSK

Assuming the 90 days horizon Orient Overseas is expected to generate 2.01 times less return on investment than Mitsui OSK. In addition to that, Orient Overseas is 1.22 times more volatile than Mitsui OSK Lines. It trades about 0.02 of its total potential returns per unit of risk. Mitsui OSK Lines is currently generating about 0.06 per unit of volatility. If you would invest  1,742  in Mitsui OSK Lines on December 29, 2024 and sell it today you would earn a total of  81.00  from holding Mitsui OSK Lines or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Orient Overseas Limited  vs.  Mitsui OSK Lines

Orient Overseas

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Overseas Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Orient Overseas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitsui OSK Lines

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui OSK Lines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Mitsui OSK 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 Mitsui OSK

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

The idea behind Orient Overseas Limited and Mitsui OSK Lines 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.