Correlation Between Bon Natural and Origin Agritech

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

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

Diversification Opportunities for Bon Natural and Origin Agritech

-0.77

Correlation Coefficient

Bon Natural  Origin Agritech

Pay attention - limited upside

The 3 months correlation between Bon and Origin is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bon Natural Life and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Bon Natural 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 Bon Natural Life 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 Bon Natural i.e., Bon Natural and Origin Agritech go up and down completely randomly.

Pair Corralation between Bon Natural and Origin Agritech

Considering the 90-day investment horizon Bon Natural Life is expected to under-perform the Origin Agritech. In addition to that, Bon Natural is 1.09 times more volatile than Origin Agritech. It trades about -0.06 of its total potential returns per unit of risk. Origin Agritech is currently generating about 0.19 per unit of volatility. If you would invest  281.00  in Origin Agritech on February 28, 2024 and sell it today you would earn a total of  250.00  from holding Origin Agritech or generate 88.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Bon Natural Life  vs.  Origin Agritech

Bon Natural Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bon Natural Life has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Origin Agritech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Origin Agritech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bon Natural and Origin Agritech

The main advantage of trading using opposite Bon Natural and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bon Natural 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 Bon Natural Life 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 Stocks Directory module to find actively traded stocks across global markets.