Correlation Between Nuvation Bio and HUTCHMED DRC

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Can any of the company-specific risk be diversified away by investing in both Nuvation Bio 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 Nuvation Bio and HUTCHMED DRC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nuvation Bio and HUTCHMED DRC, you can compare the effects of market volatilities on Nuvation Bio 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 Nuvation Bio with a short position of HUTCHMED DRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuvation Bio and HUTCHMED DRC.

Diversification Opportunities for Nuvation Bio and HUTCHMED DRC

-0.77
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Nuvation and HUTCHMED is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nuvation Bio and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and Nuvation Bio 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 Nuvation Bio 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 Nuvation Bio i.e., Nuvation Bio and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between Nuvation Bio and HUTCHMED DRC

Given the investment horizon of 90 days Nuvation Bio is expected to generate 1.1 times more return on investment than HUTCHMED DRC. However, Nuvation Bio is 1.1 times more volatile than HUTCHMED DRC. It trades about 0.04 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about 0.03 per unit of risk. If you would invest  194.00  in Nuvation Bio on August 24, 2024 and sell it today you would earn a total of  86.00  from holding Nuvation Bio or generate 44.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Nuvation Bio  vs.  HUTCHMED DRC

 Performance 
       Timeline  
Nuvation Bio 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nuvation Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nuvation Bio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
HUTCHMED DRC 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, HUTCHMED DRC is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Nuvation Bio and HUTCHMED DRC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nuvation Bio and HUTCHMED DRC

The main advantage of trading using opposite Nuvation Bio and HUTCHMED DRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuvation Bio 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 Nuvation Bio 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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