Correlation Between Hong Kong and CK Hutchison

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

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

Diversification Opportunities for Hong Kong and CK Hutchison

0.4

Correlation Coefficient

Hong Kong  CK Hutchison

Very weak diversification

The 3 months correlation between Hong and CKHUY is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land 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 Hong Kong 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 Hong Kong Land 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 Hong Kong i.e., Hong Kong and CK Hutchison go up and down completely randomly.

Pair Corralation between Hong Kong and CK Hutchison

Assuming the 90 days horizon Hong Kong is expected to generate 2.45 times less return on investment than CK Hutchison. But when comparing it to its historical volatility, Hong Kong Land is 2.11 times less risky than CK Hutchison. It trades about 0.06 of its potential returns per unit of risk. CK Hutchison Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  529.00  in CK Hutchison Holdings on December 28, 2024 and sell it today you would earn a total of  58.00  from holding CK Hutchison Holdings or generate 10.96% return on investment over 90 days.

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

Hong Kong Land  vs.  CK Hutchison Holdings

Hong Kong Land

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Land are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, Hong Kong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CK Hutchison Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CK Hutchison Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CK Hutchison showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hong Kong and CK Hutchison

The main advantage of trading using opposite Hong Kong and CK Hutchison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong 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 Hong Kong Land 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.