Correlation Between HUTCHMED DRC and Valens

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

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

Diversification Opportunities for HUTCHMED DRC and Valens

0.3

Correlation Coefficient

HUTCHMED DRC  Valens

Weak diversification

The 3 months correlation between HUTCHMED and Valens is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding HUTCHMED DRC and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of HUTCHMED DRC i.e., HUTCHMED DRC and Valens go up and down completely randomly.

Pair Corralation between HUTCHMED DRC and Valens

Considering the 90-day investment horizon HUTCHMED DRC is expected to generate 0.6 times more return on investment than Valens. However, HUTCHMED DRC is 1.67 times less risky than Valens. It trades about 0.1 of its potential returns per unit of risk. Valens is currently generating about -0.03 per unit of risk. If you would invest  1,485  in HUTCHMED DRC on May 6, 2025 and sell it today you would earn a total of  242.00  from holding HUTCHMED DRC or generate 16.3% return on investment over 90 days.

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

HUTCHMED DRC  vs.  Valens

HUTCHMED DRC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, HUTCHMED DRC displayed solid returns over the last few months and may actually be approaching a breakup point.

Valens

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with HUTCHMED DRC and Valens

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

The idea behind HUTCHMED DRC and Valens 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.