Correlation Between BeiGene and Dongnan Electronics

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

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

Diversification Opportunities for BeiGene and Dongnan Electronics

0.7

Correlation Coefficient

BeiGene  Dongnan Electronics

Poor diversification

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

Pair Corralation between BeiGene and Dongnan Electronics

Assuming the 90 days trading horizon BeiGene is expected to generate 1.09 times more return on investment than Dongnan Electronics. However, BeiGene is 1.09 times more volatile than Dongnan Electronics Co. It trades about 0.23 of its potential returns per unit of risk. Dongnan Electronics Co is currently generating about 0.02 per unit of risk. If you would invest  16,240  in BeiGene on December 26, 2024 and sell it today you would earn a total of  6,018  from holding BeiGene or generate 37.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

BeiGene  vs.  Dongnan Electronics Co

BeiGene

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 17 (%) 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.

Dongnan Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongnan Electronics Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongnan Electronics 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 Dongnan Electronics

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

The idea behind BeiGene and Dongnan Electronics Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.