Correlation Between Origin Agritech and BW LPG

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

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

Diversification Opportunities for Origin Agritech and BW LPG

0.56

Correlation Coefficient

Origin Agritech  BW LPG

Very weak diversification

The 3 months correlation between Origin and BW9 is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and BW LPG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG Limited 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 BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG Limited has no effect on the direction of Origin Agritech i.e., Origin Agritech and BW LPG go up and down completely randomly.

Pair Corralation between Origin Agritech and BW LPG

Assuming the 90 days trading horizon Origin Agritech is expected to under-perform the BW LPG. In addition to that, Origin Agritech is 1.49 times more volatile than BW LPG Limited. It trades about -0.03 of its total potential returns per unit of risk. BW LPG Limited is currently generating about 0.05 per unit of volatility. If you would invest  1,007  in BW LPG Limited on December 25, 2024 and sell it today you would earn a total of  80.00  from holding BW LPG Limited or generate 7.94% return on investment over 90 days.

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

Origin Agritech  vs.  BW LPG Limited

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 fragile 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.

BW LPG Limited

Risk-Adjusted Performance

Insignificant

Over the last 90 days BW LPG Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, BW LPG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Origin Agritech and BW LPG

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

The idea behind Origin Agritech and BW LPG 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.