Correlation Between Xiamen ITG and BeiGene

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

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

Diversification Opportunities for Xiamen ITG and BeiGene

0.73

Correlation Coefficient

Xiamen ITG  BeiGene

Poor diversification

The 3 months correlation between Xiamen and BeiGene is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Xiamen ITG Group and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Xiamen ITG 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 Xiamen ITG Group 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 Xiamen ITG i.e., Xiamen ITG and BeiGene go up and down completely randomly.

Pair Corralation between Xiamen ITG and BeiGene

Assuming the 90 days trading horizon Xiamen ITG Group is expected to generate 0.8 times more return on investment than BeiGene. However, Xiamen ITG Group is 1.25 times less risky than BeiGene. It trades about 0.1 of its potential returns per unit of risk. BeiGene is currently generating about 0.07 per unit of risk. If you would invest  578.00  in Xiamen ITG Group on September 23, 2024 and sell it today you would earn a total of  85.00  from holding Xiamen ITG Group or generate 14.71% return on investment over 90 days.

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

Xiamen ITG Group  vs.  BeiGene

Xiamen ITG Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen ITG Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen ITG sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Xiamen ITG and BeiGene

The main advantage of trading using opposite Xiamen ITG and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiamen ITG 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 Xiamen ITG Group 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.