Correlation Between HUTCHMED DRC and Burning Rock

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

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

Diversification Opportunities for HUTCHMED DRC and Burning Rock

-0.39

Correlation Coefficient

HUTCHMED DRC  Burning Rock

Very good diversification

The 3 months correlation between HUTCHMED and Burning is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC 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 HUTCHMED DRC 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 HUTCHMED DRC 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 HUTCHMED DRC i.e., HUTCHMED DRC and Burning Rock go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Burning Rock

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 0.67 times more return on investment than Burning Rock. However, HUTCHMED DRC is 1.48 times less risky than Burning Rock. It trades about 0.05 of its potential returns per unit of risk. Burning Rock Biotech is currently generating about -0.1 per unit of risk. If you would invest  1,436  in HUTCHMED DRC on December 29, 2024 and sell it today you would earn a total of  90.00  from holding HUTCHMED DRC or generate 6.27% return on investment over 90 days.

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

HUTCHMED DRC  vs.  Burning Rock Biotech

HUTCHMED DRC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, HUTCHMED DRC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Burning Rock Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burning Rock Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with HUTCHMED DRC and Burning Rock

The main advantage of trading using opposite HUTCHMED DRC and Burning Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUTCHMED DRC 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 HUTCHMED DRC 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.