Correlation Between United Parks and HUTCHMED DRC

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

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

Diversification Opportunities for United Parks and HUTCHMED DRC

-0.59

Correlation Coefficient

United Parks  HUTCHMED DRC

Excellent diversification

The 3 months correlation between United and HUTCHMED is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding United Parks Resorts and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and United Parks 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 United Parks Resorts 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 United Parks i.e., United Parks and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between United Parks and HUTCHMED DRC

Given the investment horizon of 90 days United Parks Resorts is expected to generate 0.72 times more return on investment than HUTCHMED DRC. However, United Parks Resorts is 1.38 times less risky than HUTCHMED DRC. It trades about 0.08 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about -0.15 per unit of risk. If you would invest  5,060  in United Parks Resorts on September 29, 2024 and sell it today you would earn a total of  483.00  from holding United Parks Resorts or generate 9.55% return on investment over 90 days.

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

United Parks Resorts  vs.  HUTCHMED DRC

United Parks Resorts

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking signals, United Parks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 United Parks and HUTCHMED DRC

The main advantage of trading using opposite United Parks and HUTCHMED DRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parks 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 United Parks Resorts 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.