Correlation Between Origin Agritech and ASML Holding

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

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

Diversification Opportunities for Origin Agritech and ASML Holding

0.28

Correlation Coefficient

Origin Agritech  ASML Holding

Modest diversification

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

Pair Corralation between Origin Agritech and ASML Holding

Assuming the 90 days trading horizon Origin Agritech is expected to generate 1.53 times more return on investment than ASML Holding. However, Origin Agritech is 1.53 times more volatile than ASML Holding NV. It trades about 0.05 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.1 per unit of risk. If you would invest  236.00  in Origin Agritech on August 31, 2024 and sell it today you would earn a total of  20.00  from holding Origin Agritech or generate 8.47% return on investment over 90 days.

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

Origin Agritech  vs.  ASML Holding NV

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.

ASML Holding NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASML Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Origin Agritech and ASML Holding

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

The idea behind Origin Agritech and ASML Holding NV 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.