Correlation Between Overseas Commerce and Spring Ventures

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

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

Diversification Opportunities for Overseas Commerce and Spring Ventures

-0.9

Correlation Coefficient

Overseas Commerce  Spring Ventures

Pay attention - limited upside

The 3 months correlation between Overseas and Spring is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Overseas Commerce and Spring Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spring Ventures and Overseas Commerce 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 Overseas Commerce are associated (or correlated) with Spring Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spring Ventures has no effect on the direction of Overseas Commerce i.e., Overseas Commerce and Spring Ventures go up and down completely randomly.

Pair Corralation between Overseas Commerce and Spring Ventures

Assuming the 90 days trading horizon Overseas Commerce is expected to generate 0.49 times more return on investment than Spring Ventures. However, Overseas Commerce is 2.04 times less risky than Spring Ventures. It trades about 0.14 of its potential returns per unit of risk. Spring Ventures is currently generating about -0.12 per unit of risk. If you would invest  34,323  in Overseas Commerce on September 24, 2024 and sell it today you would earn a total of  3,957  from holding Overseas Commerce or generate 11.53% return on investment over 90 days.

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

Overseas Commerce  vs.  Spring Ventures

Overseas Commerce

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Overseas Commerce are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Overseas Commerce sustained solid returns over the last few months and may actually be approaching a breakup point.

Spring Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spring Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Overseas Commerce and Spring Ventures

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

The idea behind Overseas Commerce and Spring Ventures 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.