Correlation Between Origin Agritech and Veolia Environnement

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

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

Diversification Opportunities for Origin Agritech and Veolia Environnement

-0.39

Correlation Coefficient

Origin Agritech  Veolia Environnement

Very good diversification

The 3 months correlation between Origin and Veolia is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement 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 Veolia Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veolia Environnement has no effect on the direction of Origin Agritech i.e., Origin Agritech and Veolia Environnement go up and down completely randomly.

Pair Corralation between Origin Agritech and Veolia Environnement

Assuming the 90 days trading horizon Origin Agritech is expected to generate 11.52 times less return on investment than Veolia Environnement. In addition to that, Origin Agritech is 3.94 times more volatile than Veolia Environnement SA. It trades about 0.0 of its total potential returns per unit of risk. Veolia Environnement SA is currently generating about 0.22 per unit of volatility. If you would invest  1,320  in Veolia Environnement SA on December 31, 2024 and sell it today you would earn a total of  260.00  from holding Veolia Environnement SA or generate 19.7% return on investment over 90 days.

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

Origin Agritech  vs.  Veolia Environnement SA

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Veolia Environnement

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Veolia Environnement SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Veolia Environnement unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Origin Agritech and Veolia Environnement

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

The idea behind Origin Agritech and Veolia Environnement SA 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.

Check out your portfolio center.

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.