Correlation Between Safe Bulkers and Orient Overseas

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

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

Diversification Opportunities for Safe Bulkers and Orient Overseas

-0.42

Correlation Coefficient

Safe Bulkers  Orient Overseas

Very good diversification

The 3 months correlation between Safe and Orient is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas and Safe Bulkers 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 Safe Bulkers are associated (or correlated) with Orient Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Overseas has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and Orient Overseas go up and down completely randomly.

Pair Corralation between Safe Bulkers and Orient Overseas

Assuming the 90 days horizon Safe Bulkers is expected to generate 0.33 times more return on investment than Orient Overseas. However, Safe Bulkers is 3.0 times less risky than Orient Overseas. It trades about 0.01 of its potential returns per unit of risk. Orient Overseas Limited is currently generating about -0.13 per unit of risk. If you would invest  2,537  in Safe Bulkers on September 14, 2024 and sell it today you would earn a total of  8.00  from holding Safe Bulkers or generate 0.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	87.5%
Values	Daily Returns

Safe Bulkers  vs.  Orient Overseas Limited

Safe Bulkers

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Safe Bulkers are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Safe Bulkers is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Safe Bulkers and Orient Overseas

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

The idea behind Safe Bulkers and Orient Overseas Limited 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.