Correlation Between Caihong Display and BeiGene

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

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

Diversification Opportunities for Caihong Display and BeiGene

-0.41

Correlation Coefficient

Caihong Display  BeiGene

Very good diversification

The 3 months correlation between Caihong and BeiGene is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Caihong Display Devices and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Caihong Display 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 Caihong Display Devices 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 Caihong Display i.e., Caihong Display and BeiGene go up and down completely randomly.

Pair Corralation between Caihong Display and BeiGene

Assuming the 90 days trading horizon Caihong Display Devices is expected to under-perform the BeiGene. In addition to that, Caihong Display is 1.14 times more volatile than BeiGene. It trades about -0.01 of its total potential returns per unit of risk. BeiGene is currently generating about 0.26 per unit of volatility. If you would invest  16,100  in BeiGene on October 22, 2024 and sell it today you would earn a total of  2,118  from holding BeiGene or generate 13.16% return on investment over 90 days.

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

Caihong Display Devices  vs.  BeiGene

Caihong Display Devices

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caihong Display Devices are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Caihong Display sustained solid returns over the last few months and may actually be approaching a breakup point.

BeiGene

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BeiGene is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Caihong Display and BeiGene

The main advantage of trading using opposite Caihong Display and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caihong Display 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 Caihong Display Devices 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..