Correlation Between Hutchison Telecommunicatio and Liberty Financial
Can any of the company-specific risk be diversified away by investing in both Hutchison Telecommunicatio and Liberty Financial 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 Liberty Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hutchison Telecommunications and Liberty Financial Group, you can compare the effects of market volatilities on Hutchison Telecommunicatio and Liberty Financial 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 Liberty Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hutchison Telecommunicatio and Liberty Financial.
Diversification Opportunities for Hutchison Telecommunicatio and Liberty Financial
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hutchison and Liberty is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and Liberty Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Financial 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 Liberty Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Financial has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and Liberty Financial go up and down completely randomly.
Pair Corralation between Hutchison Telecommunicatio and Liberty Financial
Assuming the 90 days trading horizon Hutchison Telecommunicatio is expected to generate 3.16 times less return on investment than Liberty Financial. In addition to that, Hutchison Telecommunicatio is 2.6 times more volatile than Liberty Financial Group. It trades about 0.06 of its total potential returns per unit of risk. Liberty Financial Group is currently generating about 0.49 per unit of volatility. If you would invest 328.00 in Liberty Financial Group on November 7, 2024 and sell it today you would earn a total of 70.00 from holding Liberty Financial Group or generate 21.34% 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. Liberty Financial Group
Performance |
| Timeline |
| Hutchison Telecommunicatio |
| Liberty Financial |
Hutchison Telecommunicatio and Liberty Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hutchison Telecommunicatio and Liberty Financial
The main advantage of trading using opposite Hutchison Telecommunicatio and Liberty Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hutchison Telecommunicatio position performs unexpectedly, Liberty Financial 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 Liberty Financial will offset losses from the drop in Liberty Financial's long position.The idea behind Hutchison Telecommunications and Liberty Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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