Correlation Between Oversea Chinese and G8 EDUCATION

Can any of the company-specific risk be diversified away by investing in both Oversea Chinese and G8 EDUCATION 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 Oversea Chinese and G8 EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oversea Chinese Banking and G8 EDUCATION, you can compare the effects of market volatilities on Oversea Chinese and G8 EDUCATION 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 Oversea Chinese with a short position of G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oversea Chinese and G8 EDUCATION.

Diversification Opportunities for Oversea Chinese and G8 EDUCATION

-0.21

Correlation Coefficient

Oversea Chinese  G8 EDUCATION

Very good diversification

The 3 months correlation between Oversea and 3EAG is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Oversea Chinese Banking and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 EDUCATION and Oversea Chinese 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 Oversea Chinese Banking are associated (or correlated) with G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of Oversea Chinese i.e., Oversea Chinese and G8 EDUCATION go up and down completely randomly.

Pair Corralation between Oversea Chinese and G8 EDUCATION

Assuming the 90 days trading horizon Oversea Chinese Banking is expected to generate 0.79 times more return on investment than G8 EDUCATION. However, Oversea Chinese Banking is 1.27 times less risky than G8 EDUCATION. It trades about 0.15 of its potential returns per unit of risk. G8 EDUCATION is currently generating about 0.08 per unit of risk. If you would invest  1,048  in Oversea Chinese Banking on September 17, 2024 and sell it today you would earn a total of  134.00  from holding Oversea Chinese Banking or generate 12.79% return on investment over 90 days.

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

Oversea Chinese Banking  vs.  G8 EDUCATION

Oversea Chinese Banking

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oversea Chinese Banking are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, Oversea Chinese may actually be approaching a critical reversion point that can send shares even higher in January 2025.

G8 EDUCATION

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in G8 EDUCATION are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, G8 EDUCATION may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oversea Chinese and G8 EDUCATION

The main advantage of trading using opposite Oversea Chinese and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oversea Chinese position performs unexpectedly, G8 EDUCATION 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.

The idea behind Oversea Chinese Banking and G8 EDUCATION 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.