Correlation Between Celsius Holdings and HUTCHMED DRC

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

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

Diversification Opportunities for Celsius Holdings and HUTCHMED DRC

0.65

Correlation Coefficient

Celsius Holdings  HUTCHMED DRC

Poor diversification

The 3 months correlation between Celsius and HUTCHMED is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Celsius Holdings and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and Celsius Holdings 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 Celsius Holdings are associated (or correlated) with HUTCHMED DRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUTCHMED DRC has no effect on the direction of Celsius Holdings i.e., Celsius Holdings and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between Celsius Holdings and HUTCHMED DRC

Given the investment horizon of 90 days Celsius Holdings is expected to generate 1.79 times more return on investment than HUTCHMED DRC. However, Celsius Holdings is 1.79 times more volatile than HUTCHMED DRC. It trades about 0.0 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about -0.01 per unit of risk. If you would invest  2,789  in Celsius Holdings on December 5, 2024 and sell it today you would lose (199.00) from holding Celsius Holdings or give up 7.14% of portfolio value over 90 days.

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

Celsius Holdings  vs.  HUTCHMED DRC

Celsius Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Celsius Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Celsius Holdings is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

HUTCHMED DRC

Risk-Adjusted Performance

Very Weak

Over the last 90 days HUTCHMED DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, HUTCHMED DRC is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Celsius Holdings and HUTCHMED DRC

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

The idea behind Celsius Holdings and HUTCHMED DRC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.