Correlation Between Hutchison Telecommunicatio and Carawine Resources
Can any of the company-specific risk be diversified away by investing in both Hutchison Telecommunicatio and Carawine Resources 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 Carawine Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hutchison Telecommunications and Carawine Resources Limited, you can compare the effects of market volatilities on Hutchison Telecommunicatio and Carawine Resources 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 Carawine Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hutchison Telecommunicatio and Carawine Resources.
Diversification Opportunities for Hutchison Telecommunicatio and Carawine Resources
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hutchison and Carawine is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and Carawine Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carawine Resources 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 Carawine Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carawine Resources has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and Carawine Resources go up and down completely randomly.
Pair Corralation between Hutchison Telecommunicatio and Carawine Resources
Assuming the 90 days trading horizon Hutchison Telecommunications is expected to generate 1.48 times more return on investment than Carawine Resources. However, Hutchison Telecommunicatio is 1.48 times more volatile than Carawine Resources Limited. It trades about 0.01 of its potential returns per unit of risk. Carawine Resources Limited is currently generating about 0.0 per unit of risk. If you would invest 4.20 in Hutchison Telecommunications on October 30, 2024 and sell it today you would lose (1.40) from holding Hutchison Telecommunications or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hutchison Telecommunications vs. Carawine Resources Limited
Performance |
| Timeline |
| Hutchison Telecommunicatio |
| Carawine Resources |
Hutchison Telecommunicatio and Carawine Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hutchison Telecommunicatio and Carawine Resources
The main advantage of trading using opposite Hutchison Telecommunicatio and Carawine Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hutchison Telecommunicatio position performs unexpectedly, Carawine Resources 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 Carawine Resources will offset losses from the drop in Carawine Resources' long position.The idea behind Hutchison Telecommunications and Carawine Resources Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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