Correlation Between Shandong Sanyuan and BeiGene

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

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

Diversification Opportunities for Shandong Sanyuan and BeiGene

-0.32

Correlation Coefficient

Shandong Sanyuan  BeiGene

Very good diversification

The 3 months correlation between Shandong and BeiGene is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sanyuan Biotechnology and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Shandong Sanyuan 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 Shandong Sanyuan Biotechnology 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 Shandong Sanyuan i.e., Shandong Sanyuan and BeiGene go up and down completely randomly.

Pair Corralation between Shandong Sanyuan and BeiGene

Assuming the 90 days trading horizon Shandong Sanyuan Biotechnology is expected to under-perform the BeiGene. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Sanyuan Biotechnology is 1.26 times less risky than BeiGene. The stock trades about -0.05 of its potential returns per unit of risk. The BeiGene is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  18,133  in BeiGene on December 2, 2024 and sell it today you would earn a total of  5,708  from holding BeiGene or generate 31.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Shandong Sanyuan Biotechnology  vs.  BeiGene

Shandong Sanyuan Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Sanyuan Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shandong Sanyuan 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 Shandong Sanyuan and BeiGene

The main advantage of trading using opposite Shandong Sanyuan and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Sanyuan 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 Shandong Sanyuan Biotechnology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.