Correlation Between HUTCHMED DRC and MDxHealth

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

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

Diversification Opportunities for HUTCHMED DRC and MDxHealth

-0.34

Correlation Coefficient

HUTCHMED DRC  MDxHealth

Very good diversification

The 3 months correlation between HUTCHMED and MDxHealth is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and MDxHealth SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDxHealth SA ADR 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 MDxHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDxHealth SA ADR has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and MDxHealth go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and MDxHealth

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 1.21 times more return on investment than MDxHealth. However, HUTCHMED DRC is 1.21 times more volatile than MDxHealth SA ADR. It trades about 0.04 of its potential returns per unit of risk. MDxHealth SA ADR is currently generating about -0.22 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.  MDxHealth SA ADR

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.

MDxHealth SA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days MDxHealth SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with HUTCHMED DRC and MDxHealth

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

The idea behind HUTCHMED DRC and MDxHealth SA ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.