Correlation Between Origin Agritech and CapitaLand Investment

Can any of the company-specific risk be diversified away by investing in both Origin Agritech and CapitaLand Investment 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 Origin Agritech and CapitaLand Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Origin Agritech and CapitaLand Investment Limited, you can compare the effects of market volatilities on Origin Agritech and CapitaLand Investment 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 Origin Agritech with a short position of CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Agritech and CapitaLand Investment.

Diversification Opportunities for Origin Agritech and CapitaLand Investment

0.69

Correlation Coefficient

Origin Agritech  CapitaLand Investment

Poor diversification

The 3 months correlation between Origin and CapitaLand is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment and Origin Agritech 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 Origin Agritech are associated (or correlated) with CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of Origin Agritech i.e., Origin Agritech and CapitaLand Investment go up and down completely randomly.

Pair Corralation between Origin Agritech and CapitaLand Investment

Assuming the 90 days trading horizon Origin Agritech is expected to generate 3.83 times more return on investment than CapitaLand Investment. However, Origin Agritech is 3.83 times more volatile than CapitaLand Investment Limited. It trades about 0.04 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about -0.05 per unit of risk. If you would invest  238.00  in Origin Agritech on September 1, 2024 and sell it today you would earn a total of  4.00  from holding Origin Agritech or generate 1.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Origin Agritech  vs.  CapitaLand Investment Limited

Origin Agritech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Origin Agritech may actually be approaching a critical reversion point that can send shares even higher in December 2024.

CapitaLand Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CapitaLand Investment Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CapitaLand Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Origin Agritech and CapitaLand Investment

The main advantage of trading using opposite Origin Agritech and CapitaLand Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Agritech position performs unexpectedly, CapitaLand Investment 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 CapitaLand Investment will offset losses from the drop in CapitaLand Investment's long position.

The idea behind Origin Agritech and CapitaLand Investment Limited 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.