Correlation Between HUTCHMED DRC and Palatin Technologies

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

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

Diversification Opportunities for HUTCHMED DRC and Palatin Technologies

-0.81

Correlation Coefficient

HUTCHMED DRC  Palatin Technologies

Pay attention - limited upside

The 3 months correlation between HUTCHMED and Palatin is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Palatin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palatin Technologies 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 Palatin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palatin Technologies has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Palatin Technologies go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Palatin Technologies

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 0.45 times more return on investment than Palatin Technologies. However, HUTCHMED DRC is 2.23 times less risky than Palatin Technologies. It trades about 0.15 of its potential returns per unit of risk. Palatin Technologies is currently generating about -0.1 per unit of risk. If you would invest  1,314  in HUTCHMED DRC on January 26, 2024 and sell it today you would earn a total of  527.00  from holding HUTCHMED DRC or generate 40.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

HUTCHMED DRC  vs.  Palatin Technologies

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.

Palatin Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palatin Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HUTCHMED DRC and Palatin Technologies

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

The idea behind HUTCHMED DRC and Palatin Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.