Correlation Between Allied Machinery and BeiGene

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

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

Diversification Opportunities for Allied Machinery and BeiGene

-0.31

Correlation Coefficient

Allied Machinery  BeiGene

Very good diversification

The 3 months correlation between Allied and BeiGene is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Allied Machinery Co and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Allied Machinery 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 Allied Machinery Co 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 Allied Machinery i.e., Allied Machinery and BeiGene go up and down completely randomly.

Pair Corralation between Allied Machinery and BeiGene

Assuming the 90 days trading horizon Allied Machinery Co is expected to generate 3.65 times more return on investment than BeiGene. However, Allied Machinery is 3.65 times more volatile than BeiGene. It trades about 0.12 of its potential returns per unit of risk. BeiGene is currently generating about -0.3 per unit of risk. If you would invest  1,669  in Allied Machinery Co on October 9, 2024 and sell it today you would earn a total of  150.00  from holding Allied Machinery Co or generate 8.99% return on investment over 90 days.

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

Allied Machinery Co  vs.  BeiGene

Allied Machinery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Machinery Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allied Machinery 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 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.

Pair Trading with Allied Machinery and BeiGene

The main advantage of trading using opposite Allied Machinery and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Machinery 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 Allied Machinery Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.