Correlation Between BeiGene and Stoke Therapeutics

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

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

Diversification Opportunities for BeiGene and Stoke Therapeutics

0.3

Correlation Coefficient

BeiGene  Stoke Therapeutics

Weak diversification

The 3 months correlation between BeiGene and Stoke is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Stoke Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoke Therapeutics 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 Stoke Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoke Therapeutics has no effect on the direction of BeiGene i.e., BeiGene and Stoke Therapeutics go up and down completely randomly.

Pair Corralation between BeiGene and Stoke Therapeutics

Given the investment horizon of 90 days BeiGene is expected to under-perform the Stoke Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, BeiGene is 1.24 times less risky than Stoke Therapeutics. The stock trades about -0.16 of its potential returns per unit of risk. The Stoke Therapeutics is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,257  in Stoke Therapeutics on October 6, 2024 and sell it today you would lose (108.00) from holding Stoke Therapeutics or give up 8.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

BeiGene  vs.  Stoke Therapeutics

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. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Stoke Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stoke Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Stoke Therapeutics is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BeiGene and Stoke Therapeutics

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

The idea behind BeiGene and Stoke Therapeutics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.