Correlation Between ABB and Origin Agritech
Can any of the company-specific risk be diversified away by investing in both ABB and Origin Agritech 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 ABB and Origin Agritech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABB and Origin Agritech, you can compare the effects of market volatilities on ABB and Origin Agritech 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 ABB with a short position of Origin Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB and Origin Agritech.
Diversification Opportunities for ABB and Origin Agritech
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ABB and Origin is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ABB and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and ABB 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 ABB are associated (or correlated) with Origin Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Agritech has no effect on the direction of ABB i.e., ABB and Origin Agritech go up and down completely randomly.
Pair Corralation between ABB and Origin Agritech
Assuming the 90 days trading horizon ABB is expected to generate 0.34 times more return on investment than Origin Agritech. However, ABB is 2.98 times less risky than Origin Agritech. It trades about -0.07 of its potential returns per unit of risk. Origin Agritech is currently generating about -0.11 per unit of risk. If you would invest 5,350 in ABB on November 29, 2024 and sell it today you would lose (150.00) from holding ABB or give up 2.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ABB vs. Origin Agritech
Performance |
| Timeline |
| ABB |
| Origin Agritech |
ABB and Origin Agritech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABB and Origin Agritech
The main advantage of trading using opposite ABB and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB position performs unexpectedly, Origin Agritech 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 Origin Agritech will offset losses from the drop in Origin Agritech's long position.The idea behind ABB and Origin Agritech 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.| Origin Agritech vs. X FAB Silicon Foundries | Origin Agritech vs. AEON METALS LTD | Origin Agritech vs. Siamgas And Petrochemicals | Origin Agritech vs. Sportsmans Warehouse Holdings |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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