Correlation Between Oversea Chinese and OVERSEA CHINUNSPADR2

Can any of the company-specific risk be diversified away by investing in both Oversea Chinese and OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2, you can compare the effects of market volatilities on Oversea Chinese and OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oversea Chinese and OVERSEA CHINUNSPADR2.

Diversification Opportunities for Oversea Chinese and OVERSEA CHINUNSPADR2

0.99

Correlation Coefficient

Oversea Chinese  OVERSEA CHINUNSPADR2

No risk reduction

The 3 months correlation between Oversea and OVERSEA is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Oversea Chinese Banking and OVERSEA CHINUNSPADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OVERSEA CHINUNSPADR2 has no effect on the direction of Oversea Chinese i.e., Oversea Chinese and OVERSEA CHINUNSPADR2 go up and down completely randomly.

Pair Corralation between Oversea Chinese and OVERSEA CHINUNSPADR2

Assuming the 90 days trading horizon Oversea Chinese Banking is expected to generate 1.39 times more return on investment than OVERSEA CHINUNSPADR2. However, Oversea Chinese is 1.39 times more volatile than OVERSEA CHINUNSPADR2. It trades about 0.09 of its potential returns per unit of risk. OVERSEA CHINUNSPADR2 is currently generating about 0.12 per unit of risk. If you would invest  1,076  in Oversea Chinese Banking on September 23, 2024 and sell it today you would earn a total of  82.00  from holding Oversea Chinese Banking or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Oversea Chinese Banking  vs.  OVERSEA CHINUNSPADR2

Oversea Chinese Banking

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oversea Chinese Banking are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Oversea Chinese may actually be approaching a critical reversion point that can send shares even higher in January 2025.

OVERSEA CHINUNSPADR2

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OVERSEA CHINUNSPADR2 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, OVERSEA CHINUNSPADR2 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oversea Chinese and OVERSEA CHINUNSPADR2

The main advantage of trading using opposite Oversea Chinese and OVERSEA CHINUNSPADR2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oversea Chinese position performs unexpectedly, OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR2 will offset losses from the drop in OVERSEA CHINUNSPADR2's long position.

The idea behind Oversea Chinese Banking and OVERSEA CHINUNSPADR2 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.