Correlation Between Corteva and Origin Agritech

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

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

Diversification Opportunities for Corteva and Origin Agritech

0.24

Correlation Coefficient

Corteva  Origin Agritech

Modest diversification

The 3 months correlation between Corteva and Origin is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Corteva and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Corteva 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 Corteva are associated (or correlated) with Origin Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Agritech has no effect on the direction of Corteva i.e., Corteva and Origin Agritech go up and down completely randomly.

Pair Corralation between Corteva and Origin Agritech

Given the investment horizon of 90 days Corteva is expected to generate 0.28 times more return on investment than Origin Agritech. However, Corteva is 3.58 times less risky than Origin Agritech. It trades about 0.1 of its potential returns per unit of risk. Origin Agritech is currently generating about -0.01 per unit of risk. If you would invest  5,641  in Corteva on December 29, 2024 and sell it today you would earn a total of  465.00  from holding Corteva or generate 8.24% return on investment over 90 days.

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

Corteva  vs.  Origin Agritech

Corteva

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corteva are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Corteva may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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. In spite of rather sound technical and fundamental indicators, Origin Agritech is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Corteva and Origin Agritech

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

The idea behind Corteva and Origin Agritech 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 Global Correlations module to find global opportunities by holding instruments from different markets.