Correlation Between BeiGene and Stoke Therapeutics

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

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

Diversification Opportunities for BeiGene and Stoke Therapeutics

-0.72

Correlation Coefficient

BeiGene  Stoke Therapeutics

Pay attention - limited upside

The 3 months correlation between BeiGene and Stoke is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Stoke Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoke Therapeutics 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 Stoke Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoke Therapeutics has no effect on the direction of BeiGene i.e., BeiGene and Stoke Therapeutics go up and down completely randomly.

Pair Corralation between BeiGene and Stoke Therapeutics

Given the investment horizon of 90 days BeiGene is expected to generate 0.68 times more return on investment than Stoke Therapeutics. However, BeiGene is 1.47 times less risky than Stoke Therapeutics. It trades about 0.2 of its potential returns per unit of risk. Stoke Therapeutics is currently generating about -0.04 per unit of risk. If you would invest  16,093  in BeiGene on July 22, 2024 and sell it today you would earn a total of  5,804  from holding BeiGene or generate 36.07% return on investment over 90 days.

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

BeiGene  vs.  Stoke Therapeutics

BeiGene

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 15 (%) 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.

Stoke Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stoke Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with BeiGene and Stoke Therapeutics

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

The idea behind BeiGene and Stoke Therapeutics 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.