Correlation Between Orient Overseas and Western Bulk

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

Diversification Opportunities for Orient Overseas and Western Bulk

-0.07

Correlation Coefficient

Orient Overseas  Western Bulk

Good diversification

The 3 months correlation between Orient and Western is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Orient Overseas Limited and Western Bulk Chartering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Bulk Chartering 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 Western Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Bulk Chartering has no effect on the direction of Orient Overseas i.e., Orient Overseas and Western Bulk go up and down completely randomly.

Pair Corralation between Orient Overseas and Western Bulk

Assuming the 90 days horizon Orient Overseas is expected to generate 5.82 times less return on investment than Western Bulk. But when comparing it to its historical volatility, Orient Overseas Limited is 1.04 times less risky than Western Bulk. It trades about 0.02 of its potential returns per unit of risk. Western Bulk Chartering is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Western Bulk Chartering on December 29, 2024 and sell it today you would earn a total of  18.00  from holding Western Bulk Chartering or generate 15.25% 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.  Western Bulk Chartering

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.

Western Bulk Chartering

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Bulk Chartering are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Western Bulk reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orient Overseas and Western Bulk

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

The idea behind Orient Overseas Limited and Western Bulk Chartering 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.