Correlation Between BeiGene and Wuxi Xinhongye

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

Diversification Opportunities for BeiGene and Wuxi Xinhongye

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between BeiGene and Wuxi is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Wuxi Xinhongye Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Xinhongye Wire and BeiGene 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 BeiGene are associated (or correlated) with Wuxi Xinhongye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Xinhongye Wire has no effect on the direction of BeiGene i.e., BeiGene and Wuxi Xinhongye go up and down completely randomly.

Pair Corralation between BeiGene and Wuxi Xinhongye

Assuming the 90 days trading horizon BeiGene is expected to generate 0.79 times more return on investment than Wuxi Xinhongye. However, BeiGene is 1.27 times less risky than Wuxi Xinhongye. It trades about 0.41 of its potential returns per unit of risk. Wuxi Xinhongye Wire is currently generating about 0.28 per unit of risk. If you would invest  19,069  in BeiGene on November 28, 2024 and sell it today you would earn a total of  3,760  from holding BeiGene or generate 19.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy94.12%
ValuesDaily Returns

BeiGene  vs.  Wuxi Xinhongye Wire

 Performance 
       Timeline  
BeiGene 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 16 (%) 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.
Wuxi Xinhongye Wire 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Wuxi Xinhongye Wire are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuxi Xinhongye sustained solid returns over the last few months and may actually be approaching a breakup point.

BeiGene and Wuxi Xinhongye Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BeiGene and Wuxi Xinhongye

The main advantage of trading using opposite BeiGene and Wuxi Xinhongye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BeiGene position performs unexpectedly, Wuxi Xinhongye 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 Wuxi Xinhongye will offset losses from the drop in Wuxi Xinhongye's long position.
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The idea behind BeiGene and Wuxi Xinhongye Wire 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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