Correlation Between HUTCHMED DRC and AMERICAN

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

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

Diversification Opportunities for HUTCHMED DRC and AMERICAN

-0.11

Correlation Coefficient

HUTCHMED DRC  AMERICAN

Good diversification

The 3 months correlation between HUTCHMED and AMERICAN is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and AMERICAN INTL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN INTL GROUP 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN INTL GROUP has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and AMERICAN go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and AMERICAN

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 4.43 times more return on investment than AMERICAN. However, HUTCHMED DRC is 4.43 times more volatile than AMERICAN INTL GROUP. It trades about 0.04 of its potential returns per unit of risk. AMERICAN INTL GROUP is currently generating about 0.01 per unit of risk. If you would invest  1,430  in HUTCHMED DRC on December 24, 2024 and sell it today you would earn a total of  79.00  from holding HUTCHMED DRC or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	27.87%
Values	Daily Returns

HUTCHMED DRC  vs.  AMERICAN INTL GROUP

HUTCHMED DRC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, HUTCHMED DRC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AMERICAN INTL GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMERICAN INTL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUTCHMED DRC and AMERICAN

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

The idea behind HUTCHMED DRC and AMERICAN INTL GROUP 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..