Correlation Between Metro Investment and BeiGene

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

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

Diversification Opportunities for Metro Investment and BeiGene

0.42

Correlation Coefficient

Metro Investment  BeiGene

Very weak diversification

The 3 months correlation between Metro and BeiGene is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Metro Investment Development and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Metro Investment 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 Metro Investment Development are associated (or correlated) with BeiGene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BeiGene has no effect on the direction of Metro Investment i.e., Metro Investment and BeiGene go up and down completely randomly.

Pair Corralation between Metro Investment and BeiGene

Assuming the 90 days trading horizon Metro Investment Development is expected to under-perform the BeiGene. In addition to that, Metro Investment is 1.45 times more volatile than BeiGene. It trades about -0.1 of its total potential returns per unit of risk. BeiGene is currently generating about -0.04 per unit of volatility. If you would invest  16,490  in BeiGene on September 25, 2024 and sell it today you would lose (369.00) from holding BeiGene or give up 2.24% of portfolio value over 90 days.

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

Metro Investment Development  vs.  BeiGene

Metro Investment Dev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Investment Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Metro Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BeiGene

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 5 (%) 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.

Pair Trading with Metro Investment and BeiGene

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

The idea behind Metro Investment Development and BeiGene 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.