Correlation Between HUTCHMED DRC and PSQ Holdings

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

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

Diversification Opportunities for HUTCHMED DRC and PSQ Holdings

-0.52

Correlation Coefficient

HUTCHMED DRC  PSQ Holdings

Excellent diversification

The 3 months correlation between HUTCHMED and PSQ is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and PSQ Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSQ Holdings 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 PSQ Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSQ Holdings has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and PSQ Holdings go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and PSQ Holdings

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 0.63 times more return on investment than PSQ Holdings. However, HUTCHMED DRC is 1.58 times less risky than PSQ Holdings. It trades about 0.08 of its potential returns per unit of risk. PSQ Holdings is currently generating about -0.08 per unit of risk. If you would invest  1,431  in HUTCHMED DRC on December 20, 2024 and sell it today you would earn a total of  187.00  from holding HUTCHMED DRC or generate 13.07% return on investment over 90 days.

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

HUTCHMED DRC  vs.  PSQ Holdings

HUTCHMED DRC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, HUTCHMED DRC displayed solid returns over the last few months and may actually be approaching a breakup point.

PSQ Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PSQ Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting 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 PSQ Holdings

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

The idea behind HUTCHMED DRC and PSQ Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.