Correlation Between HUTCHMED DRC and Cidara Therapeutics

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

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

Diversification Opportunities for HUTCHMED DRC and Cidara Therapeutics

0.35

Correlation Coefficient

HUTCHMED DRC  Cidara Therapeutics

Weak diversification

The 3 months correlation between HUTCHMED and Cidara is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Cidara Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cidara Therapeutics 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 Cidara Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cidara Therapeutics has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Cidara Therapeutics go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Cidara Therapeutics

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 0.8 times more return on investment than Cidara Therapeutics. However, HUTCHMED DRC is 1.25 times less risky than Cidara Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Cidara Therapeutics is currently generating about -0.02 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HUTCHMED DRC  vs.  Cidara Therapeutics

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.

Cidara Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cidara Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Cidara Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUTCHMED DRC and Cidara Therapeutics

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

The idea behind HUTCHMED DRC and Cidara Therapeutics 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.