Correlation Between CAL MAINE and Origin Agritech
Can any of the company-specific risk be diversified away by investing in both CAL MAINE 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 CAL MAINE and Origin Agritech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAL MAINE FOODS and Origin Agritech, you can compare the effects of market volatilities on CAL MAINE 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 CAL MAINE with a short position of Origin Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAL MAINE and Origin Agritech.
Diversification Opportunities for CAL MAINE and Origin Agritech
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between CAL and Origin is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and CAL MAINE 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 CAL MAINE FOODS 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 CAL MAINE i.e., CAL MAINE and Origin Agritech go up and down completely randomly.
Pair Corralation between CAL MAINE and Origin Agritech
Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 0.29 times more return on investment than Origin Agritech. However, CAL MAINE FOODS is 3.4 times less risky than Origin Agritech. It trades about 0.49 of its potential returns per unit of risk. Origin Agritech is currently generating about 0.01 per unit of risk. If you would invest 8,488 in CAL MAINE FOODS on September 13, 2024 and sell it today you would earn a total of 1,338 from holding CAL MAINE FOODS or generate 15.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAL MAINE FOODS vs. Origin Agritech
Performance |
| Timeline |
| CAL MAINE FOODS |
| Origin Agritech |
CAL MAINE and Origin Agritech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAL MAINE and Origin Agritech
The main advantage of trading using opposite CAL MAINE and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAL MAINE 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 CAL MAINE FOODS 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. MHP Hotel AG | Origin Agritech vs. G8 EDUCATION | Origin Agritech vs. STRAYER EDUCATION | Origin Agritech vs. DEVRY EDUCATION GRP |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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