Correlation Between Origin Agritech and Vertex Pharmaceutic

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

Diversification Opportunities for Origin Agritech and Vertex Pharmaceutic

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Origin and Vertex is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Origin Agritech and Vertex Pharmaceutic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Pharmaceutic and Origin Agritech 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 Agritech are associated (or correlated) with Vertex Pharmaceutic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Pharmaceutic has no effect on the direction of Origin Agritech i.e., Origin Agritech and Vertex Pharmaceutic go up and down completely randomly.

Pair Corralation between Origin Agritech and Vertex Pharmaceutic

Given the investment horizon of 90 days Origin Agritech is expected to generate 1.75 times more return on investment than Vertex Pharmaceutic. However, Origin Agritech is 1.75 times more volatile than Vertex Pharmaceutic. It trades about 0.12 of its potential returns per unit of risk. Vertex Pharmaceutic is currently generating about 0.14 per unit of risk. If you would invest  736.00  in Origin Agritech on April 8, 2022 and sell it today you would earn a total of  69.00  from holding Origin Agritech or generate 9.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Origin Agritech  vs.  Vertex Pharmaceutic

 Performance (%) 
      Timeline 
Origin Agritech 
Origin Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Origin Agritech may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Structure and Payout Changes

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

Origin Price Channel

Vertex Pharmaceutic 
Vertex Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Pharmaceutic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Vertex Pharmaceutic is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Structure and Payout Changes

Last Split Factor
2:1
Last Split Date
2000-08-24

Vertex Price Channel

Origin Agritech and Vertex Pharmaceutic Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Origin Agritech and Vertex Pharmaceutic

The main advantage of trading using opposite Origin Agritech and Vertex Pharmaceutic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Agritech position performs unexpectedly, Vertex Pharmaceutic 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 Vertex Pharmaceutic will offset losses from the drop in Vertex Pharmaceutic's long position.
The idea behind Origin Agritech and Vertex Pharmaceutic 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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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