Correlation Between Applied Materials and Origin Agritech
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Origin Agritech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Origin Agritech, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Origin Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Origin Agritech.
Diversification Opportunities for Applied Materials and Origin Agritech
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Applied and Origin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Origin Agritech go up and down completely randomly.
Pair Corralation between Applied Materials and Origin Agritech
Assuming the 90 days horizon Applied Materials is expected to generate 0.66 times more return on investment than Origin Agritech. However, Applied Materials is 1.52 times less risky than Origin Agritech. It trades about -0.12 of its potential returns per unit of risk. Origin Agritech is currently generating about -0.14 per unit of risk. If you would invest 17,141 in Applied Materials on August 25, 2024 and sell it today you would lose (1,275) from holding Applied Materials or give up 7.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Origin Agritech
Performance |
| Timeline |
| Applied Materials |
| Origin Agritech |
Applied Materials and Origin Agritech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Origin Agritech
The main advantage of trading using opposite Applied Materials and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. Beazer Homes USA | Applied Materials vs. INVITATION HOMES DL | Applied Materials vs. SOUTHWEST AIRLINES | Applied Materials vs. HomeToGo SE |
| Origin Agritech vs. Origin Energy Limited | Origin Agritech vs. Origin Energy Limited | Origin Agritech vs. Origin Energy Limited | Origin Agritech vs. Origin Enterprises plc |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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