Correlation Between M3 Mining and Hutchison Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both M3 Mining and Hutchison Telecommunicatio 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 M3 Mining and Hutchison Telecommunicatio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M3 Mining and Hutchison Telecommunications, you can compare the effects of market volatilities on M3 Mining and Hutchison Telecommunicatio 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 M3 Mining with a short position of Hutchison Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 Mining and Hutchison Telecommunicatio.
Diversification Opportunities for M3 Mining and Hutchison Telecommunicatio
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between M3M and Hutchison is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding M3 Mining and Hutchison Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Telecommunicatio and M3 Mining 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 M3 Mining are associated (or correlated) with Hutchison Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hutchison Telecommunicatio has no effect on the direction of M3 Mining i.e., M3 Mining and Hutchison Telecommunicatio go up and down completely randomly.
Pair Corralation between M3 Mining and Hutchison Telecommunicatio
Assuming the 90 days trading horizon M3 Mining is expected to under-perform the Hutchison Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, M3 Mining is 1.8 times less risky than Hutchison Telecommunicatio. The stock trades about -0.04 of its potential returns per unit of risk. The Hutchison Telecommunications is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3.60 in Hutchison Telecommunications on September 3, 2024 and sell it today you would lose (1.10) from holding Hutchison Telecommunications or give up 30.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
M3 Mining vs. Hutchison Telecommunications
Performance |
| Timeline |
| M3 Mining |
| Hutchison Telecommunicatio |
M3 Mining and Hutchison Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M3 Mining and Hutchison Telecommunicatio
The main advantage of trading using opposite M3 Mining and Hutchison Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 Mining position performs unexpectedly, Hutchison Telecommunicatio 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 Hutchison Telecommunicatio will offset losses from the drop in Hutchison Telecommunicatio's long position.The idea behind M3 Mining and Hutchison Telecommunications 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.| Hutchison Telecommunicatio vs. Encounter Resources | Hutchison Telecommunicatio vs. Tlou Energy | Hutchison Telecommunicatio vs. Superior Resources | Hutchison Telecommunicatio vs. Peel Mining |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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