Correlation Between Shangri La and OSK Holdings

Can any of the company-specific risk be diversified away by investing in both Shangri La and OSK Holdings 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 Shangri La and OSK Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shangri La Hotels and OSK Holdings Bhd, you can compare the effects of market volatilities on Shangri La and OSK Holdings 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 Shangri La with a short position of OSK Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shangri La and OSK Holdings.

Diversification Opportunities for Shangri La and OSK Holdings

-0.06

Correlation Coefficient

Shangri La  OSK Holdings

Good diversification

The 3 months correlation between Shangri and OSK is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Shangri La Hotels and OSK Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSK Holdings Bhd and Shangri La 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 Shangri La Hotels are associated (or correlated) with OSK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSK Holdings Bhd has no effect on the direction of Shangri La i.e., Shangri La and OSK Holdings go up and down completely randomly.

Pair Corralation between Shangri La and OSK Holdings

Assuming the 90 days trading horizon Shangri La is expected to generate 6.45 times less return on investment than OSK Holdings. But when comparing it to its historical volatility, Shangri La Hotels is 1.42 times less risky than OSK Holdings. It trades about 0.07 of its potential returns per unit of risk. OSK Holdings Bhd is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  161.00  in OSK Holdings Bhd on September 28, 2024 and sell it today you would earn a total of  17.00  from holding OSK Holdings Bhd or generate 10.56% return on investment over 90 days.

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

Shangri La Hotels  vs.  OSK Holdings Bhd

Shangri La Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shangri La Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Shangri La is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

OSK Holdings Bhd

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OSK Holdings Bhd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, OSK Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shangri La and OSK Holdings

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

The idea behind Shangri La Hotels and OSK Holdings Bhd 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..