Correlation Between Origin Agritech and Contact Energy
Can any of the company-specific risk be diversified away by investing in both Origin Agritech and Contact Energy 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 Origin Agritech and Contact Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Agritech and Contact Energy Limited, you can compare the effects of market volatilities on Origin Agritech and Contact Energy 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 Origin Agritech with a short position of Contact Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Agritech and Contact Energy.
Diversification Opportunities for Origin Agritech and Contact Energy
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Origin and Contact is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and Contact Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Energy and Origin Agritech 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 Origin Agritech are associated (or correlated) with Contact Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Energy has no effect on the direction of Origin Agritech i.e., Origin Agritech and Contact Energy go up and down completely randomly.
Pair Corralation between Origin Agritech and Contact Energy
Assuming the 90 days trading horizon Origin Agritech is expected to generate 1.11 times less return on investment than Contact Energy. In addition to that, Origin Agritech is 5.87 times more volatile than Contact Energy Limited. It trades about 0.06 of its total potential returns per unit of risk. Contact Energy Limited is currently generating about 0.41 per unit of volatility. If you would invest 440.00 in Contact Energy Limited on September 4, 2024 and sell it today you would earn a total of 36.00 from holding Contact Energy Limited or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Origin Agritech vs. Contact Energy Limited
Performance |
| Timeline |
| Origin Agritech |
| Contact Energy |
Origin Agritech and Contact Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Origin Agritech and Contact Energy
The main advantage of trading using opposite Origin Agritech and Contact Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Agritech position performs unexpectedly, Contact Energy 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 Contact Energy will offset losses from the drop in Contact Energy's long position.| Origin Agritech vs. SMA Solar Technology | Origin Agritech vs. Aedas Homes SA | Origin Agritech vs. PKSHA TECHNOLOGY INC | Origin Agritech vs. Vishay Intertechnology |
| Contact Energy vs. CENTRICA ADR NEW | Contact Energy vs. Superior Plus Corp | Contact Energy vs. NMI Holdings | Contact Energy vs. Origin Agritech |
Check out your portfolio center.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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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