Correlation Between BeiGene and Hangzhou Guotai

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

Diversification Opportunities for BeiGene and Hangzhou Guotai

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between BeiGene and Hangzhou is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Hangzhou Guotai Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Guotai Envi 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 Hangzhou Guotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Guotai Envi has no effect on the direction of BeiGene i.e., BeiGene and Hangzhou Guotai go up and down completely randomly.

Pair Corralation between BeiGene and Hangzhou Guotai

Assuming the 90 days trading horizon BeiGene is expected to under-perform the Hangzhou Guotai. But the stock apears to be less risky and, when comparing its historical volatility, BeiGene is 1.68 times less risky than Hangzhou Guotai. The stock trades about -0.3 of its potential returns per unit of risk. The Hangzhou Guotai Environmental is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,136  in Hangzhou Guotai Environmental on October 9, 2024 and sell it today you would earn a total of  57.00  from holding Hangzhou Guotai Environmental or generate 1.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

BeiGene  vs.  Hangzhou Guotai Environmental

 Performance 
       Timeline  
BeiGene 

Risk-Adjusted Performance

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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.
Hangzhou Guotai Envi 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Guotai Environmental are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Guotai may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BeiGene and Hangzhou Guotai Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BeiGene and Hangzhou Guotai

The main advantage of trading using opposite BeiGene and Hangzhou Guotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BeiGene position performs unexpectedly, Hangzhou Guotai 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 Hangzhou Guotai will offset losses from the drop in Hangzhou Guotai's long position.
The idea behind BeiGene and Hangzhou Guotai Environmental 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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