Correlation Between Longjian Road and BeiGene

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

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

Diversification Opportunities for Longjian Road and BeiGene

0.0

Correlation Coefficient

Longjian Road  BeiGene

Pay attention - limited upside

The 3 months correlation between Longjian and BeiGene is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Longjian Road Bridge and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Longjian Road 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 Longjian Road Bridge 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 Longjian Road i.e., Longjian Road and BeiGene go up and down completely randomly.

Pair Corralation between Longjian Road and BeiGene

Assuming the 90 days trading horizon Longjian Road Bridge is expected to generate 1.26 times more return on investment than BeiGene. However, Longjian Road is 1.26 times more volatile than BeiGene. It trades about 0.1 of its potential returns per unit of risk. BeiGene is currently generating about -0.05 per unit of risk. If you would invest  358.00  in Longjian Road Bridge on September 30, 2024 and sell it today you would earn a total of  63.00  from holding Longjian Road Bridge or generate 17.6% return on investment over 90 days.

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

Longjian Road Bridge  vs.  BeiGene

Longjian Road Bridge

Risk-Adjusted Performance

7 of 100

OK

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

BeiGene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BeiGene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Longjian Road and BeiGene

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

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.