Correlation Between CK HUTCHISON and Safety Insurance

Can any of the company-specific risk be diversified away by investing in both CK HUTCHISON and Safety Insurance 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 CK HUTCHISON and Safety Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CK HUTCHISON HLDGS and Safety Insurance Group, you can compare the effects of market volatilities on CK HUTCHISON and Safety Insurance 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 CK HUTCHISON with a short position of Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of CK HUTCHISON and Safety Insurance.

Diversification Opportunities for CK HUTCHISON and Safety Insurance

0.34

Correlation Coefficient

CK HUTCHISON  Safety Insurance

Weak diversification

The 3 months correlation between 2CKA and Safety is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding CK HUTCHISON HLDGS and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance and CK HUTCHISON 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 CK HUTCHISON HLDGS are associated (or correlated) with Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of CK HUTCHISON i.e., CK HUTCHISON and Safety Insurance go up and down completely randomly.

Pair Corralation between CK HUTCHISON and Safety Insurance

Assuming the 90 days trading horizon CK HUTCHISON HLDGS is expected to under-perform the Safety Insurance. But the stock apears to be less risky and, when comparing its historical volatility, CK HUTCHISON HLDGS is 1.97 times less risky than Safety Insurance. The stock trades about -0.19 of its potential returns per unit of risk. The Safety Insurance Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  7,850  in Safety Insurance Group on October 22, 2024 and sell it today you would lose (150.00) from holding Safety Insurance Group or give up 1.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CK HUTCHISON HLDGS  vs.  Safety Insurance Group

CK HUTCHISON HLDGS

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CK HUTCHISON HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, CK HUTCHISON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Safety Insurance

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Safety Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CK HUTCHISON and Safety Insurance

The main advantage of trading using opposite CK HUTCHISON and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CK HUTCHISON position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.

The idea behind CK HUTCHISON HLDGS and Safety Insurance 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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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.