Correlation Between Origin Materials and Citizens

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

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

Diversification Opportunities for Origin Materials and Citizens

-0.52

Correlation Coefficient

Origin Materials  Citizens

Excellent diversification

The 3 months correlation between Origin and Citizens is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Origin Materials and Citizens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens and Origin Materials 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 Materials are associated (or correlated) with Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens has no effect on the direction of Origin Materials i.e., Origin Materials and Citizens go up and down completely randomly.

Pair Corralation between Origin Materials and Citizens

Given the investment horizon of 90 days Origin Materials is expected to under-perform the Citizens. But the stock apears to be less risky and, when comparing its historical volatility, Origin Materials is 1.14 times less risky than Citizens. The stock trades about -0.04 of its potential returns per unit of risk. The Citizens is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  304.00  in Citizens on September 1, 2024 and sell it today you would earn a total of  144.00  from holding Citizens or generate 47.37% return on investment over 90 days.

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

Origin Materials  vs.  Citizens

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Citizens

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting forward indicators, Citizens sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Origin Materials and Citizens

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

The idea behind Origin Materials and Citizens 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.