Correlation Between HUTCHMED DRC and Blueprint Medicines

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

By analyzing existing cross correlation between HUTCHMED DRC and Blueprint Medicines Corp, you can compare the effects of market volatilities on HUTCHMED DRC and Blueprint Medicines 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 Blueprint Medicines. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUTCHMED DRC and Blueprint Medicines.

Diversification Opportunities for HUTCHMED DRC and Blueprint Medicines

-0.36

Correlation Coefficient

HUTCHMED DRC  Blueprint Medicines

Very good diversification

The 3 months correlation between HUTCHMED and Blueprint is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Blueprint Medicines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blueprint Medicines Corp 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 Blueprint Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blueprint Medicines Corp has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Blueprint Medicines go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Blueprint Medicines

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 2.46 times less return on investment than Blueprint Medicines. In addition to that, HUTCHMED DRC is 1.28 times more volatile than Blueprint Medicines Corp. It trades about 0.02 of its total potential returns per unit of risk. Blueprint Medicines Corp is currently generating about 0.06 per unit of volatility. If you would invest  4,578  in Blueprint Medicines Corp on August 31, 2024 and sell it today you would earn a total of  5,060  from holding Blueprint Medicines Corp or generate 110.53% 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.  Blueprint Medicines Corp

HUTCHMED DRC

Risk-Adjusted Performance

3 of 100

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 unfluctuating fundamental indicators, HUTCHMED DRC may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Blueprint Medicines Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blueprint Medicines Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Blueprint Medicines is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HUTCHMED DRC and Blueprint Medicines

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

The idea behind HUTCHMED DRC and Blueprint Medicines Corp 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.