Correlation Between Hutchison Telecommunicatio and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Hutchison Telecommunicatio and Commonwealth Bank 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 Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hutchison Telecommunications and Commonwealth Bank, you can compare the effects of market volatilities on Hutchison Telecommunicatio and Commonwealth Bank 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 Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hutchison Telecommunicatio and Commonwealth Bank.
Diversification Opportunities for Hutchison Telecommunicatio and Commonwealth Bank
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hutchison and Commonwealth is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Hutchison Telecommunicatio and Commonwealth Bank
Assuming the 90 days trading horizon Hutchison Telecommunications is expected to generate 2.68 times more return on investment than Commonwealth Bank. However, Hutchison Telecommunicatio is 2.68 times more volatile than Commonwealth Bank. It trades about 0.07 of its potential returns per unit of risk. Commonwealth Bank is currently generating about 0.04 per unit of risk. If you would invest 2.50 in Hutchison Telecommunications on October 12, 2024 and sell it today you would earn a total of 0.10 from holding Hutchison Telecommunications or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hutchison Telecommunications vs. Commonwealth Bank
Performance |
| Timeline |
| Hutchison Telecommunicatio |
| Commonwealth Bank |
Hutchison Telecommunicatio and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hutchison Telecommunicatio and Commonwealth Bank
The main advantage of trading using opposite Hutchison Telecommunicatio and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hutchison Telecommunicatio position performs unexpectedly, Commonwealth Bank 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank's long position.| Hutchison Telecommunicatio vs. Ainsworth Game Technology | Hutchison Telecommunicatio vs. Embark Education Group | Hutchison Telecommunicatio vs. EROAD | Hutchison Telecommunicatio vs. Iron Road |
| Commonwealth Bank vs. Hutchison Telecommunications | Commonwealth Bank vs. Medibank Private | Commonwealth Bank vs. ARN Media Limited | Commonwealth Bank vs. Magellan Financial Group |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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