Correlation Between Hutchison Telecommunicatio and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Hutchison Telecommunicatio and Rio Tinto 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 Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hutchison Telecommunications and Rio Tinto, you can compare the effects of market volatilities on Hutchison Telecommunicatio and Rio Tinto 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 Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hutchison Telecommunicatio and Rio Tinto.
Diversification Opportunities for Hutchison Telecommunicatio and Rio Tinto
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hutchison and Rio is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto 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 Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and Rio Tinto go up and down completely randomly.
Pair Corralation between Hutchison Telecommunicatio and Rio Tinto
Assuming the 90 days trading horizon Hutchison Telecommunications is expected to generate 4.95 times more return on investment than Rio Tinto. However, Hutchison Telecommunicatio is 4.95 times more volatile than Rio Tinto. It trades about 0.02 of its potential returns per unit of risk. Rio Tinto is currently generating about 0.01 per unit of risk. If you would invest 3.20 in Hutchison Telecommunications on September 15, 2024 and sell it today you would lose (0.60) from holding Hutchison Telecommunications or give up 18.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hutchison Telecommunications vs. Rio Tinto
Performance |
| Timeline |
| Hutchison Telecommunicatio |
| Rio Tinto |
Hutchison Telecommunicatio and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hutchison Telecommunicatio and Rio Tinto
The main advantage of trading using opposite Hutchison Telecommunicatio and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hutchison Telecommunicatio position performs unexpectedly, Rio Tinto 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 Rio Tinto will offset losses from the drop in Rio Tinto's long position.| Hutchison Telecommunicatio vs. Aneka Tambang Tbk | Hutchison Telecommunicatio vs. BHP Group Limited | Hutchison Telecommunicatio vs. Commonwealth Bank | Hutchison Telecommunicatio vs. Commonwealth Bank of |
| Rio Tinto vs. Northern Star Resources | Rio Tinto vs. Evolution Mining | Rio Tinto vs. Bluescope Steel | Rio Tinto vs. Sandfire Resources NL |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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