Correlation Between HUTCHMED DRC and Neogen

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

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

Diversification Opportunities for HUTCHMED DRC and Neogen

0.32

Correlation Coefficient

HUTCHMED DRC  Neogen

Weak diversification

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

Pair Corralation between HUTCHMED DRC and Neogen

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 1.0 times more return on investment than Neogen. However, HUTCHMED DRC is 1.0 times less risky than Neogen. It trades about -0.31 of its potential returns per unit of risk. Neogen is currently generating about -0.38 per unit of risk. If you would invest  1,741  in HUTCHMED DRC on September 24, 2024 and sell it today you would lose (310.00) from holding HUTCHMED DRC or give up 17.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HUTCHMED DRC  vs.  Neogen

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

Neogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with HUTCHMED DRC and Neogen

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

The idea behind HUTCHMED DRC and Neogen 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.