Correlation Between Brunswick and HUTCHMED DRC

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

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

Diversification Opportunities for Brunswick and HUTCHMED DRC

0.74

Correlation Coefficient

Brunswick  HUTCHMED DRC

Poor diversification

The 3 months correlation between Brunswick and HUTCHMED is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and Brunswick 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 Brunswick 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 Brunswick i.e., Brunswick and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between Brunswick and HUTCHMED DRC

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the HUTCHMED DRC. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 1.74 times less risky than HUTCHMED DRC. The stock trades about -0.92 of its potential returns per unit of risk. The HUTCHMED DRC is currently generating about -0.41 of returns per unit of risk over similar time horizon. If you would invest  1,695  in HUTCHMED DRC on September 29, 2024 and sell it today you would lose (268.00) from holding HUTCHMED DRC or give up 15.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Brunswick  vs.  HUTCHMED DRC

Brunswick

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brunswick has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Brunswick and HUTCHMED DRC

The main advantage of trading using opposite Brunswick and HUTCHMED DRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick 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 Brunswick 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.