Correlation Between Alibaba Group and Origin Agritech

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

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

Diversification Opportunities for Alibaba Group and Origin Agritech

0.74

Correlation Coefficient

Alibaba Group  Origin Agritech

Poor diversification

The 3 months correlation between Alibaba and Origin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Alibaba Group 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 Alibaba Group Holding 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 Alibaba Group i.e., Alibaba Group and Origin Agritech go up and down completely randomly.

Pair Corralation between Alibaba Group and Origin Agritech

Assuming the 90 days horizon Alibaba Group Holding is expected to under-perform the Origin Agritech. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 1.61 times less risky than Origin Agritech. The stock trades about -0.03 of its potential returns per unit of risk. The Origin Agritech is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  242.00  in Origin Agritech on September 12, 2024 and sell it today you would lose (4.00) from holding Origin Agritech or give up 1.65% of portfolio value over 90 days.

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

Alibaba Group Holding  vs.  Origin Agritech

Alibaba Group Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alibaba Group reported solid returns over the last few months and may actually be approaching a breakup point.

Origin Agritech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Origin Agritech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alibaba Group and Origin Agritech

The main advantage of trading using opposite Alibaba Group and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group 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 Alibaba Group Holding 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.