Correlation Between HUTCHMED DRC and Anavex Life

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

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

Diversification Opportunities for HUTCHMED DRC and Anavex Life

-0.64

Correlation Coefficient

HUTCHMED DRC  Anavex Life

Excellent diversification

The 3 months correlation between HUTCHMED and Anavex is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Anavex Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anavex Life Sciences 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 Anavex Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anavex Life Sciences has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Anavex Life go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Anavex Life

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 1.03 times more return on investment than Anavex Life. However, HUTCHMED DRC is 1.03 times more volatile than Anavex Life Sciences. It trades about 0.11 of its potential returns per unit of risk. Anavex Life Sciences is currently generating about -0.08 per unit of risk. If you would invest  1,512  in HUTCHMED DRC on March 2, 2024 and sell it today you would earn a total of  373.00  from holding HUTCHMED DRC or generate 24.67% 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.  Anavex Life Sciences

HUTCHMED DRC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, HUTCHMED DRC displayed solid returns over the last few months and may actually be approaching a breakup point.

Anavex Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anavex Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with HUTCHMED DRC and Anavex Life

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

The idea behind HUTCHMED DRC and Anavex Life Sciences 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 Anywhere module to track or share privately all of your investments from the convenience of any device.