Correlation Between AP Moeller and Hutchison Port

Can any of the company-specific risk be diversified away by investing in both AP Moeller and Hutchison Port 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 AP Moeller and Hutchison Port into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AP Moeller and Hutchison Port Holdings, you can compare the effects of market volatilities on AP Moeller and Hutchison Port 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 AP Moeller with a short position of Hutchison Port. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Moeller and Hutchison Port.

Diversification Opportunities for AP Moeller and Hutchison Port

0.63

Correlation Coefficient

AP Moeller  Hutchison Port

Poor diversification

The 3 months correlation between AMKAF and Hutchison is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller and Hutchison Port Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Port Holdings and AP Moeller 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 AP Moeller are associated (or correlated) with Hutchison Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hutchison Port Holdings has no effect on the direction of AP Moeller i.e., AP Moeller and Hutchison Port go up and down completely randomly.

Pair Corralation between AP Moeller and Hutchison Port

Assuming the 90 days horizon AP Moeller is expected to generate 0.62 times more return on investment than Hutchison Port. However, AP Moeller is 1.62 times less risky than Hutchison Port. It trades about 0.07 of its potential returns per unit of risk. Hutchison Port Holdings is currently generating about 0.04 per unit of risk. If you would invest  152,775  in AP Moeller on December 30, 2024 and sell it today you would earn a total of  19,430  from holding AP Moeller or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

AP Moeller   vs.  Hutchison Port Holdings

AP Moeller

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AP Moeller reported solid returns over the last few months and may actually be approaching a breakup point.

Hutchison Port Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hutchison Port Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Hutchison Port showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AP Moeller and Hutchison Port

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

The idea behind AP Moeller and Hutchison Port Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.