Correlation Between Xiamen East and BeiGene

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

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

Diversification Opportunities for Xiamen East and BeiGene

0.86

Correlation Coefficient

Xiamen East  BeiGene

Very poor diversification

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

Pair Corralation between Xiamen East and BeiGene

Assuming the 90 days trading horizon Xiamen East is expected to generate 2.18 times less return on investment than BeiGene. In addition to that, Xiamen East is 1.04 times more volatile than BeiGene. It trades about 0.1 of its total potential returns per unit of risk. BeiGene is currently generating about 0.23 per unit of volatility. If you would invest  16,240  in BeiGene on December 26, 2024 and sell it today you would earn a total of  6,018  from holding BeiGene or generate 37.06% return on investment over 90 days.

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

Xiamen East Asia  vs.  BeiGene

Xiamen East Asia

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen East Asia are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen East sustained solid returns over the last few months and may actually be approaching a breakup point.

BeiGene

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 17 (%) 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 Xiamen East and BeiGene

The main advantage of trading using opposite Xiamen East and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiamen East 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 Xiamen East Asia 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.