Correlation Between BeiGene and Longjian Road

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

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

Diversification Opportunities for BeiGene and Longjian Road

0.24

Correlation Coefficient

BeiGene  Longjian Road

Modest diversification

The 3 months correlation between BeiGene and Longjian is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Longjian Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longjian Road Bridge 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 Longjian Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longjian Road Bridge has no effect on the direction of BeiGene i.e., BeiGene and Longjian Road go up and down completely randomly.

Pair Corralation between BeiGene and Longjian Road

Assuming the 90 days trading horizon BeiGene is expected to under-perform the Longjian Road. But the stock apears to be less risky and, when comparing its historical volatility, BeiGene is 2.02 times less risky than Longjian Road. The stock trades about -0.04 of its potential returns per unit of risk. The Longjian Road Bridge is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  375.00  in Longjian Road Bridge on September 25, 2024 and sell it today you would earn a total of  39.00  from holding Longjian Road Bridge or generate 10.4% return on investment over 90 days.

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

BeiGene  vs.  Longjian Road Bridge

BeiGene

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 5 (%) 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.

Longjian Road Bridge

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Longjian Road Bridge are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Longjian Road sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BeiGene and Longjian Road

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

The idea behind BeiGene and Longjian Road Bridge 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.