Correlation Between HUTCHMED DRC and Centessa Pharmaceuticals

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

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

Diversification Opportunities for HUTCHMED DRC and Centessa Pharmaceuticals

-0.32

Correlation Coefficient

HUTCHMED DRC  Centessa Pharmaceuticals

Very good diversification

The 3 months correlation between HUTCHMED and Centessa is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals 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 Centessa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centessa Pharmaceuticals has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Centessa Pharmaceuticals go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Centessa Pharmaceuticals

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 0.96 times more return on investment than Centessa Pharmaceuticals. However, HUTCHMED DRC is 1.04 times less risky than Centessa Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Centessa Pharmaceuticals PLC is currently generating about -0.03 per unit of risk. If you would invest  1,436  in HUTCHMED DRC on December 30, 2024 and sell it today you would earn a total of  89.00  from holding HUTCHMED DRC or generate 6.2% 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.  Centessa Pharmaceuticals PLC

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.

Centessa Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centessa Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with HUTCHMED DRC and Centessa Pharmaceuticals

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

The idea behind HUTCHMED DRC and Centessa Pharmaceuticals PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.