Correlation Between Origin Agritech and Covenant Logistics

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Can any of the company-specific risk be diversified away by investing in both Origin Agritech and Covenant Logistics 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 Covenant Logistics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Agritech and Covenant Logistics Group, you can compare the effects of market volatilities on Origin Agritech and Covenant Logistics 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 Covenant Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Agritech and Covenant Logistics.

Diversification Opportunities for Origin Agritech and Covenant Logistics

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Origin and Covenant is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics 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 Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics has no effect on the direction of Origin Agritech i.e., Origin Agritech and Covenant Logistics go up and down completely randomly.

Pair Corralation between Origin Agritech and Covenant Logistics

Assuming the 90 days trading horizon Origin Agritech is expected to under-perform the Covenant Logistics. In addition to that, Origin Agritech is 2.25 times more volatile than Covenant Logistics Group. It trades about -0.16 of its total potential returns per unit of risk. Covenant Logistics Group is currently generating about 0.14 per unit of volatility. If you would invest  2,600  in Covenant Logistics Group on October 23, 2024 and sell it today you would earn a total of  120.00  from holding Covenant Logistics Group or generate 4.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Origin Agritech  vs.  Covenant Logistics Group

 Performance 
       Timeline  
Origin Agritech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Covenant Logistics 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Covenant Logistics reported solid returns over the last few months and may actually be approaching a breakup point.

Origin Agritech and Covenant Logistics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Origin Agritech and Covenant Logistics

The main advantage of trading using opposite Origin Agritech and Covenant Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Agritech position performs unexpectedly, Covenant Logistics 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 Covenant Logistics will offset losses from the drop in Covenant Logistics' long position.
The idea behind Origin Agritech and Covenant Logistics Group 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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