Correlation Between Origin Agritech and Universal Health

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

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

Diversification Opportunities for Origin Agritech and Universal Health

0.51

Correlation Coefficient

Origin Agritech  Universal Health

Very weak diversification

The 3 months correlation between Origin and Universal is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Services has no effect on the direction of Origin Agritech i.e., Origin Agritech and Universal Health go up and down completely randomly.

Pair Corralation between Origin Agritech and Universal Health

Assuming the 90 days trading horizon Origin Agritech is expected to under-perform the Universal Health. In addition to that, Origin Agritech is 2.67 times more volatile than Universal Health Services. It trades about -0.03 of its total potential returns per unit of risk. Universal Health Services is currently generating about -0.03 per unit of volatility. If you would invest  17,182  in Universal Health Services on December 23, 2024 and sell it today you would lose (682.00) from holding Universal Health Services or give up 3.97% of portfolio value over 90 days.

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

Origin Agritech  vs.  Universal Health Services

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 uncertain 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.

Universal Health Services

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Origin Agritech and Universal Health Services 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.