Correlation Between HUTCHMED DRC and Xtant Medical

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

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

Diversification Opportunities for HUTCHMED DRC and Xtant Medical

0.44

Correlation Coefficient

HUTCHMED DRC  Xtant Medical

Very weak diversification

The 3 months correlation between HUTCHMED and Xtant is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Xtant Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtant Medical 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 Xtant Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtant Medical Holdings has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Xtant Medical go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Xtant Medical

Considering the 90-day investment horizon HUTCHMED DRC is expected to under-perform the Xtant Medical. But the stock apears to be less risky and, when comparing its historical volatility, HUTCHMED DRC is 1.42 times less risky than Xtant Medical. The stock trades about -0.18 of its potential returns per unit of risk. The Xtant Medical Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Xtant Medical Holdings on October 24, 2024 and sell it today you would earn a total of  6.00  from holding Xtant Medical Holdings or generate 11.32% return on investment over 90 days.

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

HUTCHMED DRC  vs.  Xtant Medical Holdings

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.

Xtant Medical Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtant Medical Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Xtant Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUTCHMED DRC and Xtant Medical

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

The idea behind HUTCHMED DRC and Xtant Medical 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.