Correlation Between Origin Materials and MSP Recovery

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

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

Diversification Opportunities for Origin Materials and MSP Recovery

0.13

Correlation Coefficient

Origin Materials  MSP Recovery

Average diversification

The 3 months correlation between Origin and MSP is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Origin Materials and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery and Origin Materials 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 Materials are associated (or correlated) with MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of Origin Materials i.e., Origin Materials and MSP Recovery go up and down completely randomly.

Pair Corralation between Origin Materials and MSP Recovery

Given the investment horizon of 90 days Origin Materials is expected to generate 0.35 times more return on investment than MSP Recovery. However, Origin Materials is 2.87 times less risky than MSP Recovery. It trades about -0.01 of its potential returns per unit of risk. MSP Recovery is currently generating about -0.01 per unit of risk. If you would invest  601.00  in Origin Materials on October 25, 2024 and sell it today you would lose (496.50) from holding Origin Materials or give up 82.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.96%
Values	Daily Returns

Origin Materials  vs.  MSP Recovery

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

MSP Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSP Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak technical and fundamental indicators, MSP Recovery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Origin Materials and MSP Recovery

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

The idea behind Origin Materials and MSP Recovery 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.