Correlation Between HUTCHMED DRC and ESH Acquisition

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

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

Diversification Opportunities for HUTCHMED DRC and ESH Acquisition

-0.57

Correlation Coefficient

HUTCHMED DRC  ESH Acquisition

Excellent diversification

The 3 months correlation between HUTCHMED and ESH is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition Corp 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 ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and ESH Acquisition go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and ESH Acquisition

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 6.34 times more return on investment than ESH Acquisition. However, HUTCHMED DRC is 6.34 times more volatile than ESH Acquisition Corp. It trades about 0.01 of its potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.03 per unit of risk. If you would invest  1,708  in HUTCHMED DRC on September 29, 2024 and sell it today you would lose (281.00) from holding HUTCHMED DRC or give up 16.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.23%
Values	Daily Returns

HUTCHMED DRC  vs.  ESH Acquisition Corp

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.

ESH Acquisition Corp

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUTCHMED DRC and ESH Acquisition

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

The idea behind HUTCHMED DRC and ESH Acquisition Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.