Correlation Between Origin Agritech and LOréal SA
Can any of the company-specific risk be diversified away by investing in both Origin Agritech and LOréal SA 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 LOréal SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Agritech and LOral SA, you can compare the effects of market volatilities on Origin Agritech and LOréal SA 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 LOréal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Agritech and LOréal SA.
Diversification Opportunities for Origin Agritech and LOréal SA
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Origin and LOréal is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOréal SA 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 LOréal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOréal SA has no effect on the direction of Origin Agritech i.e., Origin Agritech and LOréal SA go up and down completely randomly.
Pair Corralation between Origin Agritech and LOréal SA
Assuming the 90 days trading horizon Origin Agritech is expected to generate 2.71 times more return on investment than LOréal SA. However, Origin Agritech is 2.71 times more volatile than LOral SA. It trades about 0.03 of its potential returns per unit of risk. LOral SA is currently generating about -0.15 per unit of risk. If you would invest 236.00 in Origin Agritech on September 2, 2024 and sell it today you would earn a total of 6.00 from holding Origin Agritech or generate 2.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Origin Agritech vs. LOral SA
Performance |
| Timeline |
| Origin Agritech |
| LOréal SA |
Origin Agritech and LOréal SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Origin Agritech and LOréal SA
The main advantage of trading using opposite Origin Agritech and LOréal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Agritech position performs unexpectedly, LOréal SA 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 LOréal SA will offset losses from the drop in LOréal SA's long position.| Origin Agritech vs. CENTURIA OFFICE REIT | Origin Agritech vs. Ryanair Holdings plc | Origin Agritech vs. KENEDIX OFFICE INV | Origin Agritech vs. MAVEN WIRELESS SWEDEN |
| LOréal SA vs. Colgate Palmolive | LOréal SA vs. Superior Plus Corp | LOréal SA vs. NMI Holdings | LOréal SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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