Correlation Between HUTCHMED DRC and Tenaya Therapeutics

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

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

Diversification Opportunities for HUTCHMED DRC and Tenaya Therapeutics

-0.46

Correlation Coefficient

HUTCHMED DRC  Tenaya Therapeutics

Very good diversification

The 3 months correlation between HUTCHMED and Tenaya is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Tenaya Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaya Therapeutics 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 Tenaya Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaya Therapeutics has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Tenaya Therapeutics go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Tenaya Therapeutics

Considering the 90-day investment horizon HUTCHMED DRC is expected to under-perform the Tenaya Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, HUTCHMED DRC is 2.9 times less risky than Tenaya Therapeutics. The stock trades about -0.11 of its potential returns per unit of risk. The Tenaya Therapeutics is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  241.00  in Tenaya Therapeutics on September 3, 2024 and sell it today you would earn a total of  116.00  from holding Tenaya Therapeutics or generate 48.13% return on investment over 90 days.

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

HUTCHMED DRC  vs.  Tenaya Therapeutics

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 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.

Tenaya Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaya Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Tenaya Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUTCHMED DRC and Tenaya Therapeutics

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

The idea behind HUTCHMED DRC and Tenaya Therapeutics 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.