Correlation Between HUTCHMED DRC and LENNAR

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

By analyzing existing cross correlation between HUTCHMED DRC and LENNAR P 525, you can compare the effects of market volatilities on HUTCHMED DRC and LENNAR 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 LENNAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUTCHMED DRC and LENNAR.

Diversification Opportunities for HUTCHMED DRC and LENNAR

0.36

Correlation Coefficient

HUTCHMED DRC  LENNAR

Weak diversification

The 3 months correlation between HUTCHMED and LENNAR is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and LENNAR P 525 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENNAR P 525 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 LENNAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENNAR P 525 has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and LENNAR go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and LENNAR

Considering the 90-day investment horizon HUTCHMED DRC is expected to under-perform the LENNAR. In addition to that, HUTCHMED DRC is 12.29 times more volatile than LENNAR P 525. It trades about -0.09 of its total potential returns per unit of risk. LENNAR P 525 is currently generating about -0.09 per unit of volatility. If you would invest  10,121  in LENNAR P 525 on September 25, 2024 and sell it today you would lose (131.00) from holding LENNAR P 525 or give up 1.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.19%
Values	Daily Returns

HUTCHMED DRC  vs.  LENNAR P 525

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.

LENNAR P 525

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LENNAR P 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LENNAR is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUTCHMED DRC and LENNAR

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

The idea behind HUTCHMED DRC and LENNAR P 525 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.