Correlation Between UCB SA and BeiGene

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

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

Diversification Opportunities for UCB SA and BeiGene

-0.15

Correlation Coefficient

UCB SA  BeiGene

Good diversification

The 3 months correlation between UCB and BeiGene is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding UCB SA ADR and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and UCB SA 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 UCB SA ADR 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 UCB SA i.e., UCB SA and BeiGene go up and down completely randomly.

Pair Corralation between UCB SA and BeiGene

Assuming the 90 days horizon UCB SA ADR is expected to generate 0.53 times more return on investment than BeiGene. However, UCB SA ADR is 1.87 times less risky than BeiGene. It trades about 0.1 of its potential returns per unit of risk. BeiGene is currently generating about 0.0 per unit of risk. If you would invest  3,693  in UCB SA ADR on January 26, 2024 and sell it today you would earn a total of  2,786  from holding UCB SA ADR or generate 75.44% return on investment over 90 days.

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

UCB SA ADR  vs.  BeiGene

UCB SA ADR

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UCB SA ADR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, UCB SA showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with UCB SA and BeiGene

The main advantage of trading using opposite UCB SA and BeiGene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UCB SA 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 UCB SA ADR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.