Correlation Between Shenzhen Silver and BeiGene

Can any of the company-specific risk be diversified away by investing in both Shenzhen Silver 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 Shenzhen Silver and BeiGene into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shenzhen Silver Basis and BeiGene, you can compare the effects of market volatilities on Shenzhen Silver 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 Shenzhen Silver with a short position of BeiGene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Silver and BeiGene.

Diversification Opportunities for Shenzhen Silver and BeiGene

0.78

Correlation Coefficient

Shenzhen Silver  BeiGene

Poor diversification

The 3 months correlation between Shenzhen and BeiGene is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Silver Basis and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Shenzhen Silver 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 Shenzhen Silver Basis 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 Shenzhen Silver i.e., Shenzhen Silver and BeiGene go up and down completely randomly.

Pair Corralation between Shenzhen Silver and BeiGene

Assuming the 90 days trading horizon Shenzhen Silver Basis is expected to under-perform the BeiGene. In addition to that, Shenzhen Silver is 1.31 times more volatile than BeiGene. It trades about -0.01 of its total potential returns per unit of risk. BeiGene is currently generating about 0.2 per unit of volatility. If you would invest  16,400  in BeiGene on December 27, 2024 and sell it today you would earn a total of  5,363  from holding BeiGene or generate 32.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Shenzhen Silver Basis  vs.  BeiGene

Shenzhen Silver Basis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Silver Basis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Silver is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BeiGene

Risk-Adjusted Performance

Solid

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.

Pair Trading with Shenzhen Silver and BeiGene

The main advantage of trading using opposite Shenzhen Silver and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Silver 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.

The idea behind Shenzhen Silver Basis 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.