Correlation Between Li Ning and Origin Agritech

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

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

Diversification Opportunities for Li Ning and Origin Agritech

-0.2

Correlation Coefficient

Li Ning  Origin Agritech

Good diversification

The 3 months correlation between LNLB and Origin is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Li Ning Company and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Li Ning 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 Li Ning Company 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 Li Ning i.e., Li Ning and Origin Agritech go up and down completely randomly.

Pair Corralation between Li Ning and Origin Agritech

Assuming the 90 days trading horizon Li Ning Company is expected to generate 0.56 times more return on investment than Origin Agritech. However, Li Ning Company is 1.77 times less risky than Origin Agritech. It trades about 0.0 of its potential returns per unit of risk. Origin Agritech is currently generating about -0.03 per unit of risk. If you would invest  201.00  in Li Ning Company on December 26, 2024 and sell it today you would lose (5.00) from holding Li Ning Company or give up 2.49% of portfolio value over 90 days.

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

Li Ning Company  vs.  Origin Agritech

Li Ning Company

Risk-Adjusted Performance

Very Weak

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

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 Li Ning and Origin Agritech

The main advantage of trading using opposite Li Ning and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Ning 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 Li Ning Company 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.