Correlation Between Origin Agritech and Australian Agricultural

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

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

Diversification Opportunities for Origin Agritech and Australian Agricultural

0.25

Correlation Coefficient

Origin Agritech  Australian Agricultural

Modest diversification

The 3 months correlation between Origin and Australian is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural 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 Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Origin Agritech i.e., Origin Agritech and Australian Agricultural go up and down completely randomly.

Pair Corralation between Origin Agritech and Australian Agricultural

Assuming the 90 days trading horizon Origin Agritech is expected to under-perform the Australian Agricultural. In addition to that, Origin Agritech is 3.87 times more volatile than Australian Agricultural. It trades about -0.04 of its total potential returns per unit of risk. Australian Agricultural is currently generating about 0.09 per unit of volatility. If you would invest  83.00  in Australian Agricultural on November 29, 2024 and sell it today you would earn a total of  6.00  from holding Australian Agricultural or generate 7.23% return on investment over 90 days.

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

Origin Agritech  vs.  Australian Agricultural

Origin Agritech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Origin Agritech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Australian Agricultural

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Australian Agricultural may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Origin Agritech and Australian Agricultural

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

The idea behind Origin Agritech and Australian Agricultural 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.