Correlation Between Origin Agritech and WuXi AppTec

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

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

Diversification Opportunities for Origin Agritech and WuXi AppTec

-0.28

Correlation Coefficient

Origin Agritech  WuXi AppTec

Very good diversification

The 3 months correlation between Origin and WuXi is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and WuXi AppTec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WuXi AppTec 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 WuXi AppTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WuXi AppTec has no effect on the direction of Origin Agritech i.e., Origin Agritech and WuXi AppTec go up and down completely randomly.

Pair Corralation between Origin Agritech and WuXi AppTec

Assuming the 90 days trading horizon Origin Agritech is expected to generate 2.97 times more return on investment than WuXi AppTec. However, Origin Agritech is 2.97 times more volatile than WuXi AppTec Co. It trades about 0.26 of its potential returns per unit of risk. WuXi AppTec Co is currently generating about -0.13 per unit of risk. If you would invest  290.00  in Origin Agritech on March 4, 2024 and sell it today you would earn a total of  172.00  from holding Origin Agritech or generate 59.31% return on investment over 90 days.

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

Origin Agritech  vs.  WuXi AppTec Co

Origin Agritech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Origin Agritech reported solid returns over the last few months and may actually be approaching a breakup point.

WuXi AppTec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WuXi AppTec Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Origin Agritech and WuXi AppTec

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

The idea behind Origin Agritech and WuXi AppTec Co 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.