Correlation Between Huafa Industrial and BeiGene

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

Diversification Opportunities for Huafa Industrial and BeiGene

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Huafa and BeiGene is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Huafa Industrial Co and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Huafa Industrial 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 Huafa Industrial Co 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 Huafa Industrial i.e., Huafa Industrial and BeiGene go up and down completely randomly.

Pair Corralation between Huafa Industrial and BeiGene

Assuming the 90 days trading horizon Huafa Industrial is expected to generate 2.66 times less return on investment than BeiGene. In addition to that, Huafa Industrial is 1.08 times more volatile than BeiGene. It trades about 0.03 of its total potential returns per unit of risk. BeiGene is currently generating about 0.08 per unit of volatility. If you would invest  13,750  in BeiGene on September 3, 2024 and sell it today you would earn a total of  4,388  from holding BeiGene or generate 31.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Huafa Industrial Co  vs.  BeiGene

 Performance 
       Timeline  
Huafa Industrial 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Huafa Industrial Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huafa Industrial 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.

Huafa Industrial and BeiGene Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Huafa Industrial and BeiGene

The main advantage of trading using opposite Huafa Industrial and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huafa Industrial 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 Huafa Industrial Co 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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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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