Correlation Between Westrock Coffee and HUTCHMED DRC

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

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

Diversification Opportunities for Westrock Coffee and HUTCHMED DRC

-0.51

Correlation Coefficient

Westrock Coffee  HUTCHMED DRC

Excellent diversification

The 3 months correlation between Westrock and HUTCHMED is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee i.e., Westrock Coffee and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between Westrock Coffee and HUTCHMED DRC

Given the investment horizon of 90 days Westrock Coffee is expected to generate 1.29 times more return on investment than HUTCHMED DRC. However, Westrock Coffee is 1.29 times more volatile than HUTCHMED DRC. It trades about -0.03 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about -0.4 per unit of risk. If you would invest  702.00  in Westrock Coffee on August 22, 2024 and sell it today you would lose (22.00) from holding Westrock Coffee or give up 3.13% of portfolio value over 90 days.

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

Westrock Coffee  vs.  HUTCHMED DRC

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 very healthy fundamental indicators, HUTCHMED DRC is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Westrock Coffee and HUTCHMED DRC

The main advantage of trading using opposite Westrock Coffee and HUTCHMED DRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westrock Coffee 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 Westrock Coffee 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.