Correlation Between Burning Rock and Applied DNA

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

By analyzing existing cross correlation between Burning Rock Biotech and Applied DNA Sciences, you can compare the effects of market volatilities on Burning Rock and Applied DNA 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 Burning Rock with a short position of Applied DNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burning Rock and Applied DNA.

Diversification Opportunities for Burning Rock and Applied DNA

0.46

Correlation Coefficient

Burning Rock  Applied DNA

Very weak diversification

The 3 months correlation between Burning and Applied is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Burning Rock Biotech and Applied DNA Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied DNA Sciences and Burning Rock 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 Burning Rock Biotech are associated (or correlated) with Applied DNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied DNA Sciences has no effect on the direction of Burning Rock i.e., Burning Rock and Applied DNA go up and down completely randomly.

Pair Corralation between Burning Rock and Applied DNA

Considering the 90-day investment horizon Burning Rock Biotech is expected to generate 0.79 times more return on investment than Applied DNA. However, Burning Rock Biotech is 1.26 times less risky than Applied DNA. It trades about 0.06 of its potential returns per unit of risk. Applied DNA Sciences is currently generating about -0.26 per unit of risk. If you would invest  500.00  in Burning Rock Biotech on August 31, 2024 and sell it today you would earn a total of  31.00  from holding Burning Rock Biotech or generate 6.2% return on investment over 90 days.

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

Burning Rock Biotech  vs.  Applied DNA Sciences

Burning Rock Biotech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

Applied DNA Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied DNA Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Burning Rock and Applied DNA

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

The idea behind Burning Rock Biotech and Applied DNA Sciences 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.