Correlation Between Orient Overseas and BW LPG

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

Diversification Opportunities for Orient Overseas and BW LPG

0.45

Correlation Coefficient

Orient Overseas  BW LPG

Very weak diversification

The 3 months correlation between Orient and BWLLY is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Orient Overseas Limited and BW LPG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG 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 BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG has no effect on the direction of Orient Overseas i.e., Orient Overseas and BW LPG go up and down completely randomly.

Pair Corralation between Orient Overseas and BW LPG

Assuming the 90 days horizon Orient Overseas is expected to generate 1.55 times less return on investment than BW LPG. But when comparing it to its historical volatility, Orient Overseas Limited is 1.15 times less risky than BW LPG. It trades about 0.03 of its potential returns per unit of risk. BW LPG is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,291  in BW LPG on September 14, 2024 and sell it today you would earn a total of  263.00  from holding BW LPG or generate 20.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.41%
Values	Daily Returns

Orient Overseas Limited  vs.  BW LPG

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BW LPG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW LPG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, BW LPG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orient Overseas and BW LPG

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

The idea behind Orient Overseas Limited and BW LPG 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.