Correlation Between AP Moeller and Orient Overseas

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

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

Diversification Opportunities for AP Moeller and Orient Overseas

-0.09

Correlation Coefficient

AP Moeller  Orient Overseas

Good diversification

The 3 months correlation between AMKAF and Orient is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas and AP Moeller 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 AP Moeller 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 has no effect on the direction of AP Moeller i.e., AP Moeller and Orient Overseas go up and down completely randomly.

Pair Corralation between AP Moeller and Orient Overseas

Assuming the 90 days horizon AP Moeller is expected to generate 2.16 times more return on investment than Orient Overseas. However, AP Moeller is 2.16 times more volatile than Orient Overseas Limited. It trades about 0.05 of its potential returns per unit of risk. Orient Overseas Limited is currently generating about -0.03 per unit of risk. If you would invest  142,800  in AP Moeller on September 4, 2024 and sell it today you would earn a total of  9,164  from holding AP Moeller or generate 6.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

AP Moeller   vs.  Orient Overseas Limited

AP Moeller

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AP Moeller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Orient Overseas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orient Overseas Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with AP Moeller and Orient Overseas

The main advantage of trading using opposite AP Moeller and Orient Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Moeller 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 AP Moeller and Orient Overseas Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.