Correlation Between Takeda Pharmaceutical and HUTCHMED DRC

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

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

Diversification Opportunities for Takeda Pharmaceutical and HUTCHMED DRC

-0.07

Correlation Coefficient

Takeda Pharmaceutical  HUTCHMED DRC

Good diversification

The 3 months correlation between Takeda and HUTCHMED is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Takeda Pharmaceutical Co and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and Takeda Pharmaceutical 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 Takeda Pharmaceutical Co 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 Takeda Pharmaceutical i.e., Takeda Pharmaceutical and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between Takeda Pharmaceutical and HUTCHMED DRC

Considering the 90-day investment horizon Takeda Pharmaceutical Co is expected to under-perform the HUTCHMED DRC. But the stock apears to be less risky and, when comparing its historical volatility, Takeda Pharmaceutical Co is 3.61 times less risky than HUTCHMED DRC. The stock trades about -0.12 of its potential returns per unit of risk. The HUTCHMED DRC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,744  in HUTCHMED DRC on August 31, 2024 and sell it today you would earn a total of  99.00  from holding HUTCHMED DRC or generate 5.68% return on investment over 90 days.

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

Takeda Pharmaceutical Co  vs.  HUTCHMED DRC

Takeda Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Takeda Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

HUTCHMED DRC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, HUTCHMED DRC may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Takeda Pharmaceutical and HUTCHMED DRC

The main advantage of trading using opposite Takeda Pharmaceutical and HUTCHMED DRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Takeda Pharmaceutical 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 Takeda Pharmaceutical Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.