Correlation Between Origin Agritech and Alphabet

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

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

Diversification Opportunities for Origin Agritech and Alphabet

-0.49

Correlation Coefficient

Origin Agritech  Alphabet

Very good diversification

The 3 months correlation between Origin and Alphabet is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Origin Agritech i.e., Origin Agritech and Alphabet go up and down completely randomly.

Pair Corralation between Origin Agritech and Alphabet

Assuming the 90 days trading horizon Origin Agritech is expected to generate 3.79 times more return on investment than Alphabet. However, Origin Agritech is 3.79 times more volatile than Alphabet Class A. It trades about 0.04 of its potential returns per unit of risk. Alphabet Class A is currently generating about 0.09 per unit of risk. If you would invest  177.00  in Origin Agritech on October 8, 2024 and sell it today you would earn a total of  19.00  from holding Origin Agritech or generate 10.73% return on investment over 90 days.

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

Origin Agritech  vs.  Alphabet Class A

Origin Agritech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Agritech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Alphabet Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Origin Agritech and Alphabet

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

The idea behind Origin Agritech and Alphabet Class A 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.