Correlation Between HUTCHMED DRC and RadNet

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

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

Diversification Opportunities for HUTCHMED DRC and RadNet

-0.42

Correlation Coefficient

HUTCHMED DRC  RadNet

Very good diversification

The 3 months correlation between HUTCHMED and RadNet is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and RadNet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RadNet Inc 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 RadNet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RadNet Inc has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and RadNet go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and RadNet

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 4.15 times less return on investment than RadNet. In addition to that, HUTCHMED DRC is 1.07 times more volatile than RadNet Inc. It trades about 0.02 of its total potential returns per unit of risk. RadNet Inc is currently generating about 0.1 per unit of volatility. If you would invest  6,723  in RadNet Inc on September 12, 2024 and sell it today you would earn a total of  1,169  from holding RadNet Inc or generate 17.39% 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.  RadNet Inc

HUTCHMED DRC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

RadNet Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RadNet Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, RadNet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUTCHMED DRC and RadNet

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

The idea behind HUTCHMED DRC and RadNet Inc 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.