Correlation Between HUTCHMED DRC and Douglas Emmett

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

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

Diversification Opportunities for HUTCHMED DRC and Douglas Emmett

-0.37

Correlation Coefficient

HUTCHMED DRC  Douglas Emmett

Very good diversification

The 3 months correlation between HUTCHMED and Douglas is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett 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 Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Douglas Emmett go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Douglas Emmett

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 1.3 times less return on investment than Douglas Emmett. In addition to that, HUTCHMED DRC is 1.57 times more volatile than Douglas Emmett. It trades about 0.01 of its total potential returns per unit of risk. Douglas Emmett is currently generating about 0.03 per unit of volatility. If you would invest  1,378  in Douglas Emmett on October 11, 2024 and sell it today you would earn a total of  312.00  from holding Douglas Emmett or generate 22.64% 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.  Douglas Emmett

HUTCHMED DRC

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Douglas Emmett

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HUTCHMED DRC and Douglas Emmett

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

The idea behind HUTCHMED DRC and Douglas Emmett 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.