Correlation Between BeiGene and Shanghai Xinhua

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

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

Diversification Opportunities for BeiGene and Shanghai Xinhua

-0.31

Correlation Coefficient

BeiGene  Shanghai Xinhua

Very good diversification

The 3 months correlation between BeiGene and Shanghai is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Shanghai Xinhua Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Xinhua Media 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 Shanghai Xinhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Xinhua Media has no effect on the direction of BeiGene i.e., BeiGene and Shanghai Xinhua go up and down completely randomly.

Pair Corralation between BeiGene and Shanghai Xinhua

Assuming the 90 days trading horizon BeiGene is expected to generate 0.34 times more return on investment than Shanghai Xinhua. However, BeiGene is 2.96 times less risky than Shanghai Xinhua. It trades about -0.27 of its potential returns per unit of risk. Shanghai Xinhua Media is currently generating about -0.44 per unit of risk. If you would invest  16,628  in BeiGene on October 11, 2024 and sell it today you would lose (1,127) from holding BeiGene or give up 6.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

BeiGene  vs.  Shanghai Xinhua Media

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 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.

Shanghai Xinhua Media

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Xinhua Media are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Xinhua sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BeiGene and Shanghai Xinhua

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

The idea behind BeiGene and Shanghai Xinhua Media 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.