Correlation Between Magna International and Origin Agritech

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

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

Diversification Opportunities for Magna International and Origin Agritech

-0.14

Correlation Coefficient

Magna International  Origin Agritech

Good diversification

The 3 months correlation between Magna and Origin is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Magna International 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 Magna International 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 Magna International i.e., Magna International and Origin Agritech go up and down completely randomly.

Pair Corralation between Magna International and Origin Agritech

Assuming the 90 days horizon Magna International is expected to generate 0.51 times more return on investment than Origin Agritech. However, Magna International is 1.98 times less risky than Origin Agritech. It trades about 0.09 of its potential returns per unit of risk. Origin Agritech is currently generating about 0.03 per unit of risk. If you would invest  3,745  in Magna International on August 31, 2024 and sell it today you would earn a total of  475.00  from holding Magna International or generate 12.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Magna International  vs.  Origin Agritech

Magna International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Magna International reported solid returns over the last few months and may actually be approaching a breakup point.

Origin Agritech

Risk-Adjusted Performance

2 of 100

Insignificant

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. Despite nearly fragile basic indicators, Origin Agritech may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Magna International and Origin Agritech

The main advantage of trading using opposite Magna International and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International 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 Magna International 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.