Correlation Between BAXALTA and HUTCHMED DRC

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

By analyzing existing cross correlation between BAXALTA INC 4 and HUTCHMED DRC, you can compare the effects of market volatilities on BAXALTA 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 BAXALTA with a short position of HUTCHMED DRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAXALTA and HUTCHMED DRC.

Diversification Opportunities for BAXALTA and HUTCHMED DRC

0.02

Correlation Coefficient

BAXALTA  HUTCHMED DRC

Significant diversification

The 3 months correlation between BAXALTA and HUTCHMED is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BAXALTA INC 4 and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and BAXALTA 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 BAXALTA INC 4 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 BAXALTA i.e., BAXALTA and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between BAXALTA and HUTCHMED DRC

Assuming the 90 days trading horizon BAXALTA INC 4 is expected to generate 0.03 times more return on investment than HUTCHMED DRC. However, BAXALTA INC 4 is 34.32 times less risky than HUTCHMED DRC. It trades about 0.09 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about -0.03 per unit of risk. If you would invest  9,820  in BAXALTA INC 4 on September 24, 2024 and sell it today you would earn a total of  141.00  from holding BAXALTA INC 4 or generate 1.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.58%
Values	Daily Returns

BAXALTA INC 4  vs.  HUTCHMED DRC

BAXALTA INC 4

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BAXALTA INC 4 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BAXALTA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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

Pair Trading with BAXALTA and HUTCHMED DRC

The main advantage of trading using opposite BAXALTA and HUTCHMED DRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAXALTA 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 BAXALTA INC 4 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.