Correlation Between Origin Agritech and American Homes

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

By analyzing existing cross correlation between Origin Agritech and American Homes 4, you can compare the effects of market volatilities on Origin Agritech and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Agritech and American Homes.

Diversification Opportunities for Origin Agritech and American Homes

0.51

Correlation Coefficient

Origin Agritech  American Homes

Very weak diversification

The 3 months correlation between Origin and American is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Origin Agritech i.e., Origin Agritech and American Homes go up and down completely randomly.

Pair Corralation between Origin Agritech and American Homes

Assuming the 90 days trading horizon Origin Agritech is expected to generate 3.27 times more return on investment than American Homes. However, Origin Agritech is 3.27 times more volatile than American Homes 4. It trades about -0.01 of its potential returns per unit of risk. American Homes 4 is currently generating about -0.04 per unit of risk. If you would invest  232.00  in Origin Agritech on November 20, 2024 and sell it today you would lose (28.00) from holding Origin Agritech or give up 12.07% of portfolio value over 90 days.

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

Origin Agritech  vs.  American Homes 4

Origin Agritech

Risk-Adjusted Performance

Weak

Over the last 90 days Origin Agritech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Origin Agritech is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

American Homes 4

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Homes 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American Homes 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 American Homes

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

The idea behind Origin Agritech and American Homes 4 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.