Correlation Between Hutchison Telecommunicatio and Australian Agricultural

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Can any of the company-specific risk be diversified away by investing in both Hutchison Telecommunicatio and Australian Agricultural 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 Hutchison Telecommunicatio and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hutchison Telecommunications and Australian Agricultural, you can compare the effects of market volatilities on Hutchison Telecommunicatio and Australian Agricultural 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 Hutchison Telecommunicatio with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hutchison Telecommunicatio and Australian Agricultural.

Diversification Opportunities for Hutchison Telecommunicatio and Australian Agricultural

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Hutchison and Australian is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Hutchison Telecommunicatio 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 Hutchison Telecommunications are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and Australian Agricultural go up and down completely randomly.

Pair Corralation between Hutchison Telecommunicatio and Australian Agricultural

Assuming the 90 days trading horizon Hutchison Telecommunications is expected to under-perform the Australian Agricultural. In addition to that, Hutchison Telecommunicatio is 3.43 times more volatile than Australian Agricultural. It trades about -0.07 of its total potential returns per unit of risk. Australian Agricultural is currently generating about -0.14 per unit of volatility. If you would invest  143.00  in Australian Agricultural on August 25, 2024 and sell it today you would lose (5.00) from holding Australian Agricultural or give up 3.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hutchison Telecommunications  vs.  Australian Agricultural

 Performance 
       Timeline  
Hutchison Telecommunicatio 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hutchison Telecommunications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hutchison Telecommunicatio is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Australian Agricultural 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Australian Agricultural is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hutchison Telecommunicatio and Australian Agricultural Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hutchison Telecommunicatio and Australian Agricultural

The main advantage of trading using opposite Hutchison Telecommunicatio and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hutchison Telecommunicatio position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.
The idea behind Hutchison Telecommunications and Australian Agricultural 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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