Correlation Between SITC International and Orient Overseas

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

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

Diversification Opportunities for SITC International and Orient Overseas

0.38

Correlation Coefficient

SITC International  Orient Overseas

Weak diversification

The 3 months correlation between SITC and Orient is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding SITC International Holdings and Orient Overseas International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas Inte and SITC International 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 SITC International Holdings are associated (or correlated) with Orient Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Overseas Inte has no effect on the direction of SITC International i.e., SITC International and Orient Overseas go up and down completely randomly.

Pair Corralation between SITC International and Orient Overseas

Assuming the 90 days horizon SITC International Holdings is expected to generate 3.56 times more return on investment than Orient Overseas. However, SITC International is 3.56 times more volatile than Orient Overseas International. It trades about 0.04 of its potential returns per unit of risk. Orient Overseas International is currently generating about 0.01 per unit of risk. If you would invest  2,390  in SITC International Holdings on December 28, 2024 and sell it today you would earn a total of  112.00  from holding SITC International Holdings or generate 4.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

SITC International Holdings  vs.  Orient Overseas International

SITC International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SITC International Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, SITC International showed solid returns over the last few months and may actually be approaching a breakup point.

Orient Overseas Inte

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SITC International and Orient Overseas

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

The idea behind SITC International Holdings and Orient Overseas International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.