Correlation Between Origin Agritech and STORA ENSO

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

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

Diversification Opportunities for Origin Agritech and STORA ENSO

0.2

Correlation Coefficient

Origin Agritech  STORA ENSO

Modest diversification

The 3 months correlation between Origin and STORA is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and STORA ENSO OYJ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORA ENSO OYJ 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 STORA ENSO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORA ENSO OYJ has no effect on the direction of Origin Agritech i.e., Origin Agritech and STORA ENSO go up and down completely randomly.

Pair Corralation between Origin Agritech and STORA ENSO

Assuming the 90 days trading horizon Origin Agritech is expected to under-perform the STORA ENSO. In addition to that, Origin Agritech is 2.24 times more volatile than STORA ENSO OYJ. It trades about -0.01 of its total potential returns per unit of risk. STORA ENSO OYJ is currently generating about 0.01 per unit of volatility. If you would invest  910.00  in STORA ENSO OYJ on December 27, 2024 and sell it today you would lose (6.00) from holding STORA ENSO OYJ or give up 0.66% of portfolio value over 90 days.

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

Origin Agritech  vs.  STORA ENSO OYJ

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 nearly stable basic indicators, Origin Agritech is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

STORA ENSO OYJ

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Origin Agritech and STORA ENSO OYJ 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.