Correlation Between Neurocrine Biosciences and BeiGene

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

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

Diversification Opportunities for Neurocrine Biosciences and BeiGene

-0.73

Correlation Coefficient

Neurocrine Biosciences  BeiGene

Pay attention - limited upside

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

Pair Corralation between Neurocrine Biosciences and BeiGene

Given the investment horizon of 90 days Neurocrine Biosciences is expected to generate 7.12 times less return on investment than BeiGene. But when comparing it to its historical volatility, Neurocrine Biosciences is 1.58 times less risky than BeiGene. It trades about 0.02 of its potential returns per unit of risk. BeiGene is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  18,826  in BeiGene on September 2, 2024 and sell it today you would earn a total of  2,674  from holding BeiGene or generate 14.2% return on investment over 90 days.

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

Neurocrine Biosciences  vs.  BeiGene

Neurocrine Biosciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Neurocrine Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Neurocrine Biosciences is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

BeiGene

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BeiGene exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neurocrine Biosciences and BeiGene

The main advantage of trading using opposite Neurocrine Biosciences and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neurocrine Biosciences 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 Neurocrine Biosciences 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.