Correlation Between Hutchison Telecommunicatio and Coles
Can any of the company-specific risk be diversified away by investing in both Hutchison Telecommunicatio and Coles 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 Coles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hutchison Telecommunications and Coles Group, you can compare the effects of market volatilities on Hutchison Telecommunicatio and Coles 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 Coles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hutchison Telecommunicatio and Coles.
Diversification Opportunities for Hutchison Telecommunicatio and Coles
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hutchison and Coles is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and Coles Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coles Group 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 Coles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coles Group has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and Coles go up and down completely randomly.
Pair Corralation between Hutchison Telecommunicatio and Coles
Assuming the 90 days trading horizon Hutchison Telecommunications is expected to generate 2.83 times more return on investment than Coles. However, Hutchison Telecommunicatio is 2.83 times more volatile than Coles Group. It trades about 0.18 of its potential returns per unit of risk. Coles Group is currently generating about 0.22 per unit of risk. If you would invest 2.60 in Hutchison Telecommunications on September 26, 2024 and sell it today you would earn a total of 0.20 from holding Hutchison Telecommunications or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hutchison Telecommunications vs. Coles Group
Performance |
| Timeline |
| Hutchison Telecommunicatio |
| Coles Group |
Hutchison Telecommunicatio and Coles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hutchison Telecommunicatio and Coles
The main advantage of trading using opposite Hutchison Telecommunicatio and Coles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hutchison Telecommunicatio position performs unexpectedly, Coles 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 Coles will offset losses from the drop in Coles' long position.The idea behind Hutchison Telecommunications and Coles Group 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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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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