Correlation Between Stepan and HUTCHMED DRC
Can any of the company-specific risk be diversified away by investing in both Stepan 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 Stepan and HUTCHMED DRC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and HUTCHMED DRC, you can compare the effects of market volatilities on Stepan 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 Stepan with a short position of HUTCHMED DRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and HUTCHMED DRC.
Diversification Opportunities for Stepan and HUTCHMED DRC
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stepan and HUTCHMED is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and Stepan 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 Stepan Company 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 Stepan i.e., Stepan and HUTCHMED DRC go up and down completely randomly.
Pair Corralation between Stepan and HUTCHMED DRC
Considering the 90-day investment horizon Stepan is expected to generate 2.62 times less return on investment than HUTCHMED DRC. But when comparing it to its historical volatility, Stepan Company is 1.41 times less risky than HUTCHMED DRC. It trades about 0.09 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,485 in HUTCHMED DRC on April 30, 2025 and sell it today you would earn a total of 436.00 from holding HUTCHMED DRC or generate 29.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. HUTCHMED DRC
Performance |
| Timeline |
| Stepan Company |
| HUTCHMED DRC |
Stepan and HUTCHMED DRC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and HUTCHMED DRC
The main advantage of trading using opposite Stepan and HUTCHMED DRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan 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 Stepan Company 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.| HUTCHMED DRC vs. Collegium Pharmaceutical | HUTCHMED DRC vs. Evotec SE ADR | HUTCHMED DRC vs. I Mab | HUTCHMED DRC vs. Legend Biotech Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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