Correlation Between HUTCHMED DRC and NETGEAR

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

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

Diversification Opportunities for HUTCHMED DRC and NETGEAR

-0.81

Correlation Coefficient

HUTCHMED DRC  NETGEAR

Pay attention - limited upside

The 3 months correlation between HUTCHMED and NETGEAR is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and NETGEAR go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and NETGEAR

Considering the 90-day investment horizon HUTCHMED DRC is expected to under-perform the NETGEAR. In addition to that, HUTCHMED DRC is 1.2 times more volatile than NETGEAR. It trades about -0.02 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.0 per unit of volatility. If you would invest  2,532  in NETGEAR on December 4, 2024 and sell it today you would lose (45.00) from holding NETGEAR or give up 1.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

HUTCHMED DRC  vs.  NETGEAR

HUTCHMED DRC

Risk-Adjusted Performance

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 very healthy fundamental indicators, HUTCHMED DRC is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, NETGEAR is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with HUTCHMED DRC and NETGEAR

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

The idea behind HUTCHMED DRC and NETGEAR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.