Correlation Between HUTCHMED DRC and Sunshine Biopharma

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

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

Diversification Opportunities for HUTCHMED DRC and Sunshine Biopharma

0.11

Correlation Coefficient

HUTCHMED DRC  Sunshine Biopharma

Average diversification

The 3 months correlation between HUTCHMED and Sunshine is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Sunshine Biopharma Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunshine Biopharma 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 Sunshine Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunshine Biopharma has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Sunshine Biopharma go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Sunshine Biopharma

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 7.61 times less return on investment than Sunshine Biopharma. But when comparing it to its historical volatility, HUTCHMED DRC is 5.66 times less risky than Sunshine Biopharma. It trades about 0.12 of its potential returns per unit of risk. Sunshine Biopharma Warrant is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Sunshine Biopharma Warrant on February 22, 2024 and sell it today you would earn a total of  5.00  from holding Sunshine Biopharma Warrant or generate 83.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

HUTCHMED DRC  vs.  Sunshine Biopharma Warrant

HUTCHMED DRC

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, HUTCHMED DRC displayed solid returns over the last few months and may actually be approaching a breakup point.

Sunshine Biopharma

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunshine Biopharma Warrant are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent primary indicators, Sunshine Biopharma showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HUTCHMED DRC and Sunshine Biopharma

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

The idea behind HUTCHMED DRC and Sunshine Biopharma Warrant 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.