Correlation Between China Resources and Origin Agritech
Can any of the company-specific risk be diversified away by investing in both China Resources 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 Resources 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 Resources Land and Origin Agritech, you can compare the effects of market volatilities on China Resources 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 Resources with a short position of Origin Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Origin Agritech.
Diversification Opportunities for China Resources and Origin Agritech
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Origin is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Land and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and China Resources 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 Resources Land 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 Resources i.e., China Resources and Origin Agritech go up and down completely randomly.
Pair Corralation between China Resources and Origin Agritech
Assuming the 90 days horizon China Resources Land is expected to generate 0.73 times more return on investment than Origin Agritech. However, China Resources Land is 1.37 times less risky than Origin Agritech. It trades about 0.05 of its potential returns per unit of risk. Origin Agritech is currently generating about -0.02 per unit of risk. If you would invest 137.00 in China Resources Land on September 2, 2024 and sell it today you would earn a total of 135.00 from holding China Resources Land or generate 98.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Land vs. Origin Agritech
Performance |
| Timeline |
| China Resources Land |
| Origin Agritech |
China Resources and Origin Agritech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and Origin Agritech
The main advantage of trading using opposite China Resources and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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.| China Resources vs. NXP Semiconductors NV | China Resources vs. Daito Trust Construction | China Resources vs. Chongqing Machinery Electric | China Resources vs. Elmos Semiconductor SE |
| Origin Agritech vs. CENTURIA OFFICE REIT | Origin Agritech vs. Ryanair Holdings plc | Origin Agritech vs. KENEDIX OFFICE INV | Origin Agritech vs. MAVEN WIRELESS SWEDEN |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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