Correlation Between China Aluminum and BeiGene

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Can any of the company-specific risk be diversified away by investing in both China Aluminum 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 China Aluminum and BeiGene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Aluminum International and BeiGene, you can compare the effects of market volatilities on China Aluminum 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 China Aluminum with a short position of BeiGene. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Aluminum and BeiGene.

Diversification Opportunities for China Aluminum and BeiGene

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between China and BeiGene is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding China Aluminum International and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and China Aluminum 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 China Aluminum International 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 China Aluminum i.e., China Aluminum and BeiGene go up and down completely randomly.

Pair Corralation between China Aluminum and BeiGene

Assuming the 90 days trading horizon China Aluminum International is not expected to generate positive returns. However, China Aluminum International is 1.08 times less risky than BeiGene. It waists most of its returns potential to compensate for thr risk taken. BeiGene is generating about 0.01 per unit of risk. If you would invest  15,500  in BeiGene on October 9, 2024 and sell it today you would earn a total of  180.00  from holding BeiGene or generate 1.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

China Aluminum International  vs.  BeiGene

 Performance 
       Timeline  
China Aluminum Inter 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days China Aluminum International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Aluminum 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

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BeiGene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Aluminum and BeiGene Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Aluminum and BeiGene

The main advantage of trading using opposite China Aluminum and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aluminum 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 China Aluminum International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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