Correlation Between Hutchison Telecommunicatio and Sonic Healthcare
Can any of the company-specific risk be diversified away by investing in both Hutchison Telecommunicatio and Sonic Healthcare 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 Sonic Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hutchison Telecommunications and Sonic Healthcare, you can compare the effects of market volatilities on Hutchison Telecommunicatio and Sonic Healthcare 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 Sonic Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hutchison Telecommunicatio and Sonic Healthcare.
Diversification Opportunities for Hutchison Telecommunicatio and Sonic Healthcare
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hutchison and Sonic is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and Sonic Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare 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 Sonic Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonic Healthcare has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and Sonic Healthcare go up and down completely randomly.
Pair Corralation between Hutchison Telecommunicatio and Sonic Healthcare
Assuming the 90 days trading horizon Hutchison Telecommunications is expected to under-perform the Sonic Healthcare. In addition to that, Hutchison Telecommunicatio is 2.15 times more volatile than Sonic Healthcare. It trades about -0.15 of its total potential returns per unit of risk. Sonic Healthcare is currently generating about 0.16 per unit of volatility. If you would invest 2,693 in Sonic Healthcare on September 1, 2024 and sell it today you would earn a total of 164.00 from holding Sonic Healthcare or generate 6.09% 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. Sonic Healthcare
Performance |
| Timeline |
| Hutchison Telecommunicatio |
| Sonic Healthcare |
Hutchison Telecommunicatio and Sonic Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hutchison Telecommunicatio and Sonic Healthcare
The main advantage of trading using opposite Hutchison Telecommunicatio and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hutchison Telecommunicatio position performs unexpectedly, Sonic Healthcare 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 Sonic Healthcare will offset losses from the drop in Sonic Healthcare's long position.The idea behind Hutchison Telecommunications and Sonic Healthcare 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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