Correlation Between HUTCHMED DRC and Coty

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

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

Diversification Opportunities for HUTCHMED DRC and Coty

-0.41

Correlation Coefficient

HUTCHMED DRC  Coty

Very good diversification

The 3 months correlation between HUTCHMED and Coty is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc 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 Coty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coty Inc has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Coty go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Coty

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 2.15 times more return on investment than Coty. However, HUTCHMED DRC is 2.15 times more volatile than Coty Inc. It trades about 0.02 of its potential returns per unit of risk. Coty Inc is currently generating about 0.03 per unit of risk. If you would invest  1,917  in HUTCHMED DRC on January 29, 2024 and sell it today you would lose (101.00) from holding HUTCHMED DRC or give up 5.27% of portfolio value over 90 days.

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

HUTCHMED DRC  vs.  Coty Inc

HUTCHMED DRC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, HUTCHMED DRC displayed solid returns over the last few months and may actually be approaching a breakup point.

Coty Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coty Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Coty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUTCHMED DRC and Coty

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

The idea behind HUTCHMED DRC and Coty Inc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.