Correlation Between Japan Petroleum and Origin Agritech

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

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

Diversification Opportunities for Japan Petroleum and Origin Agritech

-0.56

Correlation Coefficient

Japan Petroleum  Origin Agritech

Excellent diversification

The 3 months correlation between Japan and Origin is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Japan Petroleum Exploration and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Japan Petroleum 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 Japan Petroleum Exploration 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 Japan Petroleum i.e., Japan Petroleum and Origin Agritech go up and down completely randomly.

Pair Corralation between Japan Petroleum and Origin Agritech

Assuming the 90 days horizon Japan Petroleum Exploration is expected to generate 0.26 times more return on investment than Origin Agritech. However, Japan Petroleum Exploration is 3.87 times less risky than Origin Agritech. It trades about 0.16 of its potential returns per unit of risk. Origin Agritech is currently generating about -0.03 per unit of risk. If you would invest  670.00  in Japan Petroleum Exploration on December 22, 2024 and sell it today you would earn a total of  85.00  from holding Japan Petroleum Exploration or generate 12.69% return on investment over 90 days.

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

Japan Petroleum Exploration  vs.  Origin Agritech

Japan Petroleum Expl

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Petroleum Exploration are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Japan Petroleum and Origin Agritech

The main advantage of trading using opposite Japan Petroleum and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Petroleum 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 Japan Petroleum Exploration 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.