Correlation Between Origin Agritech and PPG Industries

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

Diversification Opportunities for Origin Agritech and PPG Industries

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Origin and PPG is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Origin Agritech i.e., Origin Agritech and PPG Industries go up and down completely randomly.

Pair Corralation between Origin Agritech and PPG Industries

Assuming the 90 days trading horizon Origin Agritech is expected to generate 5.42 times more return on investment than PPG Industries. However, Origin Agritech is 5.42 times more volatile than PPG Industries. It trades about 0.01 of its potential returns per unit of risk. PPG Industries is currently generating about -0.01 per unit of risk. If you would invest  292.00  in Origin Agritech on October 6, 2024 and sell it today you would lose (90.00) from holding Origin Agritech or give up 30.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Origin Agritech  vs.  PPG Industries

 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.
PPG Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Origin Agritech and PPG Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Origin Agritech and PPG Industries

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

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