Correlation Between Ford and Hutchison Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both Ford and Hutchison Telecommunicatio 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 Ford and Hutchison Telecommunicatio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Hutchison Telecommunications, you can compare the effects of market volatilities on Ford and Hutchison Telecommunicatio 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 Ford with a short position of Hutchison Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Hutchison Telecommunicatio.
Diversification Opportunities for Ford and Hutchison Telecommunicatio
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and Hutchison is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hutchison Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Telecommunicatio and Ford 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 Ford Motor are associated (or correlated) with Hutchison Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hutchison Telecommunicatio has no effect on the direction of Ford i.e., Ford and Hutchison Telecommunicatio go up and down completely randomly.
Pair Corralation between Ford and Hutchison Telecommunicatio
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.71 times more return on investment than Hutchison Telecommunicatio. However, Ford Motor is 1.41 times less risky than Hutchison Telecommunicatio. It trades about 0.0 of its potential returns per unit of risk. Hutchison Telecommunications is currently generating about -0.11 per unit of risk. If you would invest 1,122 in Ford Motor on August 29, 2024 and sell it today you would lose (12.00) from holding Ford Motor or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Hutchison Telecommunications
Performance |
| Timeline |
| Ford Motor |
| Hutchison Telecommunicatio |
Ford and Hutchison Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Hutchison Telecommunicatio
The main advantage of trading using opposite Ford and Hutchison Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Hutchison Telecommunicatio 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 Hutchison Telecommunicatio will offset losses from the drop in Hutchison Telecommunicatio's long position.The idea behind Ford Motor and Hutchison Telecommunications 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.| Hutchison Telecommunicatio vs. Macquarie Group | Hutchison Telecommunicatio vs. CSL | Hutchison Telecommunicatio vs. Commonwealth Bank of | Hutchison Telecommunicatio vs. Commonwealth Bank of |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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