Correlation Between China Mobile and Origin Agritech

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

Diversification Opportunities for China Mobile and Origin Agritech

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between China and Origin is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and China Mobile 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 China Life Insurance 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 China Mobile i.e., China Mobile and Origin Agritech go up and down completely randomly.

Pair Corralation between China Mobile and Origin Agritech

Assuming the 90 days horizon China Life Insurance is expected to generate 0.7 times more return on investment than Origin Agritech. However, China Life Insurance is 1.42 times less risky than Origin Agritech. It trades about 0.09 of its potential returns per unit of risk. Origin Agritech is currently generating about 0.01 per unit of risk. If you would invest  59.00  in China Life Insurance on September 12, 2024 and sell it today you would earn a total of  135.00  from holding China Life Insurance or generate 228.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

China Life Insurance  vs.  Origin Agritech

 Performance 
       Timeline  
China Life Insurance 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Mobile reported solid returns over the last few months and may actually be approaching a breakup point.
Origin Agritech 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Origin Agritech reported solid returns over the last few months and may actually be approaching a breakup point.

China Mobile and Origin Agritech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Mobile and Origin Agritech

The main advantage of trading using opposite China Mobile and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mobile 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 China Life Insurance 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.
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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