Correlation Between BeiGene and Hang Xiao

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

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

Diversification Opportunities for BeiGene and Hang Xiao

0.52

Correlation Coefficient

BeiGene  Hang Xiao

Very weak diversification

The 3 months correlation between BeiGene and Hang is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Hang Xiao Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Xiao Steel 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 Hang Xiao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Xiao Steel has no effect on the direction of BeiGene i.e., BeiGene and Hang Xiao go up and down completely randomly.

Pair Corralation between BeiGene and Hang Xiao

Assuming the 90 days trading horizon BeiGene is expected to generate 1.3 times more return on investment than Hang Xiao. However, BeiGene is 1.3 times more volatile than Hang Xiao Steel. It trades about 0.02 of its potential returns per unit of risk. Hang Xiao Steel is currently generating about -0.03 per unit of risk. If you would invest  14,480  in BeiGene on September 26, 2024 and sell it today you would earn a total of  1,641  from holding BeiGene or generate 11.33% return on investment over 90 days.

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

BeiGene  vs.  Hang Xiao Steel

BeiGene

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BeiGene may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hang Xiao Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Xiao Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hang Xiao may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BeiGene and Hang Xiao

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

The idea behind BeiGene and Hang Xiao Steel 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.