Correlation Between Origin Agritech and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Origin Agritech and Merck KGaA 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 Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Agritech and Merck KGaA, you can compare the effects of market volatilities on Origin Agritech and Merck KGaA 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 Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Agritech and Merck KGaA.
Diversification Opportunities for Origin Agritech and Merck KGaA
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Origin and Merck is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and Merck KGaA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA 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 Merck KGaA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck KGaA has no effect on the direction of Origin Agritech i.e., Origin Agritech and Merck KGaA go up and down completely randomly.
Pair Corralation between Origin Agritech and Merck KGaA
Assuming the 90 days trading horizon Origin Agritech is expected to generate 3.94 times more return on investment than Merck KGaA. However, Origin Agritech is 3.94 times more volatile than Merck KGaA. It trades about 0.0 of its potential returns per unit of risk. Merck KGaA is currently generating about -0.02 per unit of risk. If you would invest 310.00 in Origin Agritech on September 3, 2024 and sell it today you would lose (68.00) from holding Origin Agritech or give up 21.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Origin Agritech vs. Merck KGaA
Performance |
| Timeline |
| Origin Agritech |
| Merck KGaA |
Origin Agritech and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Origin Agritech and Merck KGaA
The main advantage of trading using opposite Origin Agritech and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Agritech position performs unexpectedly, Merck KGaA 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 Merck KGaA will offset losses from the drop in Merck KGaA's long position.| Origin Agritech vs. Gamma Communications plc | Origin Agritech vs. Chunghwa Telecom Co | Origin Agritech vs. Citic Telecom International | Origin Agritech vs. Ribbon Communications |
| Merck KGaA vs. Gol Intelligent Airlines | Merck KGaA vs. BJs Wholesale Club | Merck KGaA vs. Fast Retailing Co | Merck KGaA vs. JAPAN AIRLINES |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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