Correlation Between BeiGene and Nantong Haixing

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

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

Diversification Opportunities for BeiGene and Nantong Haixing

0.55

Correlation Coefficient

BeiGene  Nantong Haixing

Very weak diversification

The 3 months correlation between BeiGene and Nantong is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Nantong Haixing Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nantong Haixing Elec 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 Nantong Haixing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nantong Haixing Elec has no effect on the direction of BeiGene i.e., BeiGene and Nantong Haixing go up and down completely randomly.

Pair Corralation between BeiGene and Nantong Haixing

Assuming the 90 days trading horizon BeiGene is expected to generate 1.04 times more return on investment than Nantong Haixing. However, BeiGene is 1.04 times more volatile than Nantong Haixing Electronics. It trades about 0.18 of its potential returns per unit of risk. Nantong Haixing Electronics is currently generating about 0.09 per unit of risk. If you would invest  17,600  in BeiGene on November 28, 2024 and sell it today you would earn a total of  4,488  from holding BeiGene or generate 25.5% return on investment over 90 days.

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

BeiGene  vs.  Nantong Haixing Electronics

BeiGene

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 14 (%) 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.

Nantong Haixing Elec

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nantong Haixing Electronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nantong Haixing may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with BeiGene and Nantong Haixing

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

The idea behind BeiGene and Nantong Haixing Electronics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.