Correlation Between Orient Overseas and Liaoning Port

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

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

Diversification Opportunities for Orient Overseas and Liaoning Port

0.44

Correlation Coefficient

Orient Overseas  Liaoning Port

Very weak diversification

The 3 months correlation between Orient and Liaoning is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Orient Overseas Limited and Liaoning Port CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Port CoLtd and Orient Overseas 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 Orient Overseas Limited are associated (or correlated) with Liaoning Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Port CoLtd has no effect on the direction of Orient Overseas i.e., Orient Overseas and Liaoning Port go up and down completely randomly.

Pair Corralation between Orient Overseas and Liaoning Port

Assuming the 90 days trading horizon Orient Overseas is expected to generate 4.6 times less return on investment than Liaoning Port. In addition to that, Orient Overseas is 1.0 times more volatile than Liaoning Port CoLtd. It trades about 0.02 of its total potential returns per unit of risk. Liaoning Port CoLtd is currently generating about 0.11 per unit of volatility. If you would invest  6.80  in Liaoning Port CoLtd on September 23, 2024 and sell it today you would earn a total of  1.15  from holding Liaoning Port CoLtd or generate 16.91% return on investment over 90 days.

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

Orient Overseas Limited  vs.  Liaoning Port CoLtd

Orient Overseas

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Overseas Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Orient Overseas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Liaoning Port CoLtd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liaoning Port CoLtd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liaoning Port reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orient Overseas and Liaoning Port

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

The idea behind Orient Overseas Limited and Liaoning Port CoLtd 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .