Correlation Between Ford and Origin Agritech

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

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

Diversification Opportunities for Ford and Origin Agritech

0.14

Correlation Coefficient

Ford  Origin Agritech

Average diversification

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

Pair Corralation between Ford and Origin Agritech

Taking into account the 90-day investment horizon Ford is expected to generate 46.06 times less return on investment than Origin Agritech. But when comparing it to its historical volatility, Ford Motor is 5.3 times less risky than Origin Agritech. It trades about 0.02 of its potential returns per unit of risk. Origin Agritech is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  230.00  in Origin Agritech on February 19, 2024 and sell it today you would earn a total of  365.00  from holding Origin Agritech or generate 158.7% return on investment over 90 days.

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

Ford Motor  vs.  Origin Agritech

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Ford and Origin Agritech

The main advantage of trading using opposite Ford and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.