Correlation Between Origin Agritech and American Vanguard

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

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

Diversification Opportunities for Origin Agritech and American Vanguard

-0.79

Correlation Coefficient

Origin Agritech  American Vanguard

Pay attention - limited upside

The 3 months correlation between Origin and American is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and American Vanguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Vanguard 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 American Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Vanguard has no effect on the direction of Origin Agritech i.e., Origin Agritech and American Vanguard go up and down completely randomly.

Pair Corralation between Origin Agritech and American Vanguard

Given the investment horizon of 90 days Origin Agritech is expected to generate 1.85 times more return on investment than American Vanguard. However, Origin Agritech is 1.85 times more volatile than American Vanguard. It trades about 0.04 of its potential returns per unit of risk. American Vanguard is currently generating about 0.02 per unit of risk. If you would invest  260.00  in Origin Agritech on September 3, 2024 and sell it today you would earn a total of  10.00  from holding Origin Agritech or generate 3.85% return on investment over 90 days.

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

Origin Agritech  vs.  American Vanguard

Origin Agritech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Origin Agritech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Vanguard

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Vanguard are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, American Vanguard is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Origin Agritech and American Vanguard

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

The idea behind Origin Agritech and American Vanguard 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.