Correlation Between BeiGene and Cassava Sciences

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

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

Diversification Opportunities for BeiGene and Cassava Sciences

-0.02

Correlation Coefficient

BeiGene  Cassava Sciences

Good diversification

The 3 months correlation between BeiGene and Cassava is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BeiGene and Cassava Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cassava Sciences 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 Cassava Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cassava Sciences has no effect on the direction of BeiGene i.e., BeiGene and Cassava Sciences go up and down completely randomly.

Pair Corralation between BeiGene and Cassava Sciences

Given the investment horizon of 90 days BeiGene is expected to under-perform the Cassava Sciences. But the stock apears to be less risky and, when comparing its historical volatility, BeiGene is 2.35 times less risky than Cassava Sciences. The stock trades about -0.11 of its potential returns per unit of risk. The Cassava Sciences is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,970  in Cassava Sciences on January 25, 2024 and sell it today you would earn a total of  85.00  from holding Cassava Sciences or generate 4.31% return on investment over 90 days.

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

BeiGene  vs.  Cassava Sciences

BeiGene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BeiGene has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Cassava Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cassava Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BeiGene and Cassava Sciences

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

The idea behind BeiGene and Cassava Sciences 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.