Correlation Between Hengerda New and BeiGene

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

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

Diversification Opportunities for Hengerda New and BeiGene

0.26

Correlation Coefficient

Hengerda New  BeiGene

Modest diversification

The 3 months correlation between Hengerda and BeiGene is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Hengerda New Materials and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Hengerda New 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 Hengerda New Materials 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 Hengerda New i.e., Hengerda New and BeiGene go up and down completely randomly.

Pair Corralation between Hengerda New and BeiGene

Assuming the 90 days trading horizon Hengerda New is expected to generate 1.26 times less return on investment than BeiGene. In addition to that, Hengerda New is 1.19 times more volatile than BeiGene. It trades about 0.08 of its total potential returns per unit of risk. BeiGene is currently generating about 0.12 per unit of volatility. If you would invest  14,600  in BeiGene on October 24, 2024 and sell it today you would earn a total of  4,378  from holding BeiGene or generate 29.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hengerda New Materials  vs.  BeiGene

Hengerda New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hengerda New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hengerda New 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

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BeiGene may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hengerda New and BeiGene

The main advantage of trading using opposite Hengerda New and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengerda New 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 Hengerda New Materials 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.