Correlation Between Perrigo and Origin Agritech

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Can any of the company-specific risk be diversified away by investing in both Perrigo 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 Perrigo and Origin Agritech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Perrigo Company and Origin Agritech, you can compare the effects of market volatilities on Perrigo 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 Perrigo with a short position of Origin Agritech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perrigo and Origin Agritech.

Diversification Opportunities for Perrigo and Origin Agritech

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between Perrigo and Origin is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Perrigo Company and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Perrigo 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 Perrigo Company 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 Perrigo i.e., Perrigo and Origin Agritech go up and down completely randomly.

Pair Corralation between Perrigo and Origin Agritech

Given the investment horizon of 90 days Perrigo is expected to generate 3.55 times less return on investment than Origin Agritech. But when comparing it to its historical volatility, Perrigo Company is 2.43 times less risky than Origin Agritech. It trades about 0.1 of its potential returns per unit of risk. Origin Agritech is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  713.00  in Origin Agritech on April 7, 2022 and sell it today you would earn a total of  93.00  from holding Origin Agritech or generate 13.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Perrigo Company  vs.  Origin Agritech

 Performance (%) 
      Timeline 
Perrigo Company 
Perrigo Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Perrigo Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, Perrigo may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0256
Payout Ratio
0.53
Last Split Factor
2:1
Forward Annual Dividend Rate
1.04
Dividend Date
2022-06-21
Ex Dividend Date
2022-06-02
Last Split Date
1993-08-26

Perrigo Price Channel

Origin Agritech 
Origin Performance
0 of 100
Over the last 90 days Origin Agritech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Origin Agritech is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Structure and Payout Changes

Last Split Factor
1:10
Dividend Date
2018-07-10
Last Split Date
2018-07-10

Origin Price Channel

Perrigo and Origin Agritech Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Perrigo and Origin Agritech

The main advantage of trading using opposite Perrigo and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perrigo 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 Perrigo Company 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.
Check out your portfolio center. 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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