Correlation Between BeiGene and Shan Dong

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

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

Diversification Opportunities for BeiGene and Shan Dong

-0.7

Correlation Coefficient

BeiGene  Shan Dong

Excellent diversification

The 3 months correlation between BeiGene and Shan is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Shan Dong Dong E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Dong Dong and BeiGene 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 BeiGene are associated (or correlated) with Shan Dong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Dong Dong has no effect on the direction of BeiGene i.e., BeiGene and Shan Dong go up and down completely randomly.

Pair Corralation between BeiGene and Shan Dong

Assuming the 90 days trading horizon BeiGene is expected to generate 2.05 times more return on investment than Shan Dong. However, BeiGene is 2.05 times more volatile than Shan Dong Dong E. It trades about 0.22 of its potential returns per unit of risk. Shan Dong Dong E is currently generating about -0.08 per unit of risk. If you would invest  19,023  in BeiGene on December 10, 2024 and sell it today you would earn a total of  2,815  from holding BeiGene or generate 14.8% return on investment over 90 days.

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

BeiGene  vs.  Shan Dong Dong E

BeiGene

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 15 (%) 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.

Shan Dong Dong

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shan Dong Dong E has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shan Dong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BeiGene and Shan Dong

The main advantage of trading using opposite BeiGene and Shan Dong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BeiGene position performs unexpectedly, Shan Dong 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 Shan Dong will offset losses from the drop in Shan Dong's long position.

The idea behind BeiGene and Shan Dong Dong E 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .