Correlation Between Danaher Corp and Burning Rock

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Can any of the company-specific risk be diversified away by investing in both Danaher Corp and Burning Rock 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 Danaher Corp and Burning Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danaher Corp and Burning Rock Biotech, you can compare the effects of market volatilities on Danaher Corp and Burning Rock 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 Danaher Corp with a short position of Burning Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danaher Corp and Burning Rock.

Diversification Opportunities for Danaher Corp and Burning Rock

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Danaher and Burning is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Danaher Corp and Burning Rock Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burning Rock Biotech and Danaher Corp 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 Danaher Corp are associated (or correlated) with Burning Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burning Rock Biotech has no effect on the direction of Danaher Corp i.e., Danaher Corp and Burning Rock go up and down completely randomly.

Pair Corralation between Danaher Corp and Burning Rock

Considering the 90-day investment horizon Danaher Corp is expected to generate 0.47 times more return on investment than Burning Rock. However, Danaher Corp is 2.11 times less risky than Burning Rock. It trades about 0.27 of its potential returns per unit of risk. Burning Rock Biotech is currently generating about 0.05 per unit of risk. If you would invest  25,600  in Danaher Corp on May 21, 2022 and sell it today you would earn a total of  3,644  from holding Danaher Corp or generate 14.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Danaher Corp  vs.  Burning Rock Biotech

 Performance (%) 
       Timeline  
Danaher Corp 
Danaher Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Danaher Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Danaher Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Danaher Price Channel

Burning Rock Biotech 
Burning Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

Burning Price Channel

Danaher Corp and Burning Rock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Danaher Corp and Burning Rock

The main advantage of trading using opposite Danaher Corp and Burning Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaher Corp position performs unexpectedly, Burning Rock 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 Burning Rock will offset losses from the drop in Burning Rock's long position.
The idea behind Danaher Corp and Burning Rock Biotech 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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