Correlation Between BiodesixInc and Burning Rock

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

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

Diversification Opportunities for BiodesixInc and Burning Rock

0.26

Correlation Coefficient

BiodesixInc  Burning Rock

Modest diversification

The 3 months correlation between BiodesixInc and Burning is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding BiodesixInc and Burning Rock BiotechLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burning Rock BiotechLtd and BiodesixInc 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 BiodesixInc are associated (or correlated) with Burning Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burning Rock BiotechLtd has no effect on the direction of BiodesixInc i.e., BiodesixInc and Burning Rock go up and down completely randomly.

Pair Corralation between BiodesixInc and Burning Rock

Given the investment horizon of 90 days BiodesixInc is expected to generate 0.53 times more return on investment than Burning Rock. However, BiodesixInc is 1.89 times less risky than Burning Rock. It trades about 0.27 of its potential returns per unit of risk. Burning Rock BiotechLtd is currently generating about 0.06 per unit of risk. If you would invest  125.00  in BiodesixInc on February 13, 2024 and sell it today you would earn a total of  24.00  from holding BiodesixInc or generate 19.2% return on investment over 90 days.

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

BiodesixInc  vs.  Burning Rock BiotechLtd

BiodesixInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BiodesixInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, BiodesixInc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Burning Rock BiotechLtd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock BiotechLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Burning Rock may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with BiodesixInc and Burning Rock

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

The idea behind BiodesixInc and Burning Rock BiotechLtd 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.