Correlation Between BeiGene and PKU HealthCare

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

By analyzing existing cross correlation between BeiGene and PKU HealthCare Corp, you can compare the effects of market volatilities on BeiGene and PKU HealthCare 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 PKU HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of BeiGene and PKU HealthCare.

Diversification Opportunities for BeiGene and PKU HealthCare

-0.53

Correlation Coefficient

BeiGene  PKU HealthCare

Excellent diversification

The 3 months correlation between BeiGene and PKU is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and PKU HealthCare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKU HealthCare Corp 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 PKU HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKU HealthCare Corp has no effect on the direction of BeiGene i.e., BeiGene and PKU HealthCare go up and down completely randomly.

Pair Corralation between BeiGene and PKU HealthCare

Assuming the 90 days trading horizon BeiGene is expected to generate 1.02 times more return on investment than PKU HealthCare. However, BeiGene is 1.02 times more volatile than PKU HealthCare Corp. It trades about 0.25 of its potential returns per unit of risk. PKU HealthCare Corp is currently generating about -0.06 per unit of risk. If you would invest  16,044  in BeiGene on December 29, 2024 and sell it today you would earn a total of  7,094  from holding BeiGene or generate 44.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

BeiGene  vs.  PKU HealthCare Corp

BeiGene

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 19 (%) 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.

PKU HealthCare Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PKU HealthCare Corp 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 BeiGene and PKU HealthCare

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

The idea behind BeiGene and PKU HealthCare Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.