Correlation Between Inspur Software and BeiGene

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

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

Diversification Opportunities for Inspur Software and BeiGene

0.8

Correlation Coefficient

Inspur Software  BeiGene

Very poor diversification

The 3 months correlation between Inspur and BeiGene is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Inspur Software Co and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Inspur Software 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 Inspur Software Co 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 Inspur Software i.e., Inspur Software and BeiGene go up and down completely randomly.

Pair Corralation between Inspur Software and BeiGene

Assuming the 90 days trading horizon Inspur Software Co is expected to generate 1.12 times more return on investment than BeiGene. However, Inspur Software is 1.12 times more volatile than BeiGene. It trades about 0.21 of its potential returns per unit of risk. BeiGene is currently generating about 0.11 per unit of risk. If you would invest  974.00  in Inspur Software Co on September 4, 2024 and sell it today you would earn a total of  583.00  from holding Inspur Software Co or generate 59.86% return on investment over 90 days.

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

Inspur Software Co  vs.  BeiGene

Inspur Software

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inspur Software Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inspur Software sustained solid returns over the last few months and may actually be approaching a breakup point.

BeiGene

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 8 (%) 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 Inspur Software and BeiGene

The main advantage of trading using opposite Inspur Software and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inspur Software 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 Inspur Software Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.