Correlation Between PSQ Holdings and HUTCHMED DRC

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

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

Diversification Opportunities for PSQ Holdings and HUTCHMED DRC

-0.56

Correlation Coefficient

PSQ Holdings  HUTCHMED DRC

Excellent diversification

The 3 months correlation between PSQ and HUTCHMED is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding PSQ Holdings and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and PSQ Holdings 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 PSQ Holdings are associated (or correlated) with HUTCHMED DRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUTCHMED DRC has no effect on the direction of PSQ Holdings i.e., PSQ Holdings and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between PSQ Holdings and HUTCHMED DRC

Given the investment horizon of 90 days PSQ Holdings is expected to generate 11.55 times more return on investment than HUTCHMED DRC. However, PSQ Holdings is 11.55 times more volatile than HUTCHMED DRC. It trades about 0.1 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about -0.2 per unit of risk. If you would invest  274.00  in PSQ Holdings on October 23, 2024 and sell it today you would earn a total of  190.00  from holding PSQ Holdings or generate 69.34% return on investment over 90 days.

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

PSQ Holdings  vs.  HUTCHMED DRC

PSQ Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PSQ Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, PSQ Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with PSQ Holdings and HUTCHMED DRC

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

The idea behind PSQ Holdings and HUTCHMED DRC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.