Correlation Between Origin Agritech and BGF World

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

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

Diversification Opportunities for Origin Agritech and BGF World

0.23

Correlation Coefficient

Origin Agritech  BGF World

Modest diversification

The 3 months correlation between Origin and BGF is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and BGF World Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF World Gold 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 BGF World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF World Gold has no effect on the direction of Origin Agritech i.e., Origin Agritech and BGF World go up and down completely randomly.

Pair Corralation between Origin Agritech and BGF World

Assuming the 90 days trading horizon Origin Agritech is expected to under-perform the BGF World. In addition to that, Origin Agritech is 3.3 times more volatile than BGF World Gold. It trades about -0.03 of its total potential returns per unit of risk. BGF World Gold is currently generating about 0.22 per unit of volatility. If you would invest  3,757  in BGF World Gold on December 21, 2024 and sell it today you would earn a total of  826.00  from holding BGF World Gold or generate 21.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Origin Agritech  vs.  BGF World Gold

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.

BGF World Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BGF World Gold are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, BGF World exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Origin Agritech and BGF World

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

The idea behind Origin Agritech and BGF World Gold 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.