Correlation Between ChengDu Hi and BeiGene

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

Diversification Opportunities for ChengDu Hi and BeiGene

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ChengDu and BeiGene is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ChengDu Hi Tech Development and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and ChengDu Hi 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 ChengDu Hi Tech Development are associated (or correlated) with BeiGene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BeiGene has no effect on the direction of ChengDu Hi i.e., ChengDu Hi and BeiGene go up and down completely randomly.

Pair Corralation between ChengDu Hi and BeiGene

Assuming the 90 days trading horizon ChengDu Hi Tech Development is expected to generate 1.5 times more return on investment than BeiGene. However, ChengDu Hi is 1.5 times more volatile than BeiGene. It trades about 0.1 of its potential returns per unit of risk. BeiGene is currently generating about 0.04 per unit of risk. If you would invest  1,213  in ChengDu Hi Tech Development on September 3, 2024 and sell it today you would earn a total of  4,688  from holding ChengDu Hi Tech Development or generate 386.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

ChengDu Hi Tech Development  vs.  BeiGene

 Performance 
       Timeline  
ChengDu Hi Tech 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ChengDu Hi Tech Development are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ChengDu Hi sustained solid returns over the last few months and may actually be approaching a breakup point.
BeiGene 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BeiGene sustained solid returns over the last few months and may actually be approaching a breakup point.

ChengDu Hi and BeiGene Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ChengDu Hi and BeiGene

The main advantage of trading using opposite ChengDu Hi and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChengDu Hi position performs unexpectedly, BeiGene 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 BeiGene will offset losses from the drop in BeiGene's long position.
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The idea behind ChengDu Hi Tech Development and BeiGene 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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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 the Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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