Correlation Between Origin Agritech and Swire Properties

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Can any of the company-specific risk be diversified away by investing in both Origin Agritech and Swire Properties 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 Swire Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Agritech and Swire Properties Limited, you can compare the effects of market volatilities on Origin Agritech and Swire Properties 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 Swire Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Agritech and Swire Properties.

Diversification Opportunities for Origin Agritech and Swire Properties

0.42
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between Origin Agritech and Swire Properties

Assuming the 90 days trading horizon Origin Agritech is expected to generate 3.44 times more return on investment than Swire Properties. However, Origin Agritech is 3.44 times more volatile than Swire Properties Limited. It trades about 0.06 of its potential returns per unit of risk. Swire Properties Limited is currently generating about -0.08 per unit of risk. If you would invest  232.00  in Origin Agritech on September 3, 2024 and sell it today you would earn a total of  10.00  from holding Origin Agritech or generate 4.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Origin Agritech  vs.  Swire Properties Limited

 Performance 
       Timeline  
Origin Agritech 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Origin Agritech may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Swire Properties 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Swire Properties Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Swire Properties reported solid returns over the last few months and may actually be approaching a breakup point.

Origin Agritech and Swire Properties Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Origin Agritech and Swire Properties

The main advantage of trading using opposite Origin Agritech and Swire Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Agritech position performs unexpectedly, Swire Properties 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 Swire Properties will offset losses from the drop in Swire Properties' long position.
The idea behind Origin Agritech and Swire Properties 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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