Correlation Between HUTCHMED DRC and Skechers USA

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

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

Diversification Opportunities for HUTCHMED DRC and Skechers USA

-0.7

Correlation Coefficient

HUTCHMED DRC  Skechers USA

Excellent diversification

The 3 months correlation between HUTCHMED and Skechers is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Skechers USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skechers USA 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 Skechers USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skechers USA has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Skechers USA go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Skechers USA

Considering the 90-day investment horizon HUTCHMED DRC is expected to under-perform the Skechers USA. In addition to that, HUTCHMED DRC is 1.76 times more volatile than Skechers USA. It trades about -0.21 of its total potential returns per unit of risk. Skechers USA is currently generating about 0.2 per unit of volatility. If you would invest  6,186  in Skechers USA on October 26, 2024 and sell it today you would earn a total of  1,375  from holding Skechers USA or generate 22.23% return on investment over 90 days.

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

HUTCHMED DRC  vs.  Skechers USA

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.

Skechers USA

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Skechers USA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Skechers USA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUTCHMED DRC and Skechers USA

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

The idea behind HUTCHMED DRC and Skechers USA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.