Correlation Between RCABS and CK Hutchison

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

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

Diversification Opportunities for RCABS and CK Hutchison

0.3

Correlation Coefficient

RCABS  CK Hutchison

Weak diversification

The 3 months correlation between RCABS and CKHUF is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding RCABS Inc and CK Hutchison Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CK Hutchison Holdings and RCABS 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 RCABS Inc are associated (or correlated) with CK Hutchison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CK Hutchison Holdings has no effect on the direction of RCABS i.e., RCABS and CK Hutchison go up and down completely randomly.

Pair Corralation between RCABS and CK Hutchison

Given the investment horizon of 90 days RCABS Inc is expected to generate 3.31 times more return on investment than CK Hutchison. However, RCABS is 3.31 times more volatile than CK Hutchison Holdings. It trades about 0.03 of its potential returns per unit of risk. CK Hutchison Holdings is currently generating about 0.0 per unit of risk. If you would invest  0.07  in RCABS Inc on December 1, 2024 and sell it today you would lose (0.01) from holding RCABS Inc or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.97%
Values	Daily Returns

RCABS Inc  vs.  CK Hutchison Holdings

RCABS Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RCABS Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RCABS sustained solid returns over the last few months and may actually be approaching a breakup point.

CK Hutchison Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with RCABS and CK Hutchison

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

The idea behind RCABS Inc and CK Hutchison 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.