Correlation Between HUTCHMED DRC and SGS SA

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

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

Diversification Opportunities for HUTCHMED DRC and SGS SA

0.67

Correlation Coefficient

HUTCHMED DRC  SGS SA

Poor diversification

The 3 months correlation between HUTCHMED and SGS is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and SGS SA go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and SGS SA

Considering the 90-day investment horizon HUTCHMED DRC is expected to under-perform the SGS SA. In addition to that, HUTCHMED DRC is 2.36 times more volatile than SGS SA. It trades about -0.05 of its total potential returns per unit of risk. SGS SA is currently generating about -0.06 per unit of volatility. If you would invest  1,034  in SGS SA on October 22, 2024 and sell it today you would lose (108.00) from holding SGS SA or give up 10.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

HUTCHMED DRC  vs.  SGS SA

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

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HUTCHMED DRC and SGS SA

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

The idea behind HUTCHMED DRC and SGS SA 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.