Correlation Between Hutchison Telecommunicatio and National Australia

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

By analyzing existing cross correlation between Hutchison Telecommunications and National Australia Bank, you can compare the effects of market volatilities on Hutchison Telecommunicatio and National Australia 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 Hutchison Telecommunicatio with a short position of National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hutchison Telecommunicatio and National Australia.

Diversification Opportunities for Hutchison Telecommunicatio and National Australia

0.54

Correlation Coefficient

Hutchison Telecommunicatio  National Australia

Very weak diversification

The 3 months correlation between Hutchison and National is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank and Hutchison Telecommunicatio 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 Hutchison Telecommunications are associated (or correlated) with National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and National Australia go up and down completely randomly.

Pair Corralation between Hutchison Telecommunicatio and National Australia

Assuming the 90 days trading horizon Hutchison Telecommunications is expected to generate 2.88 times more return on investment than National Australia. However, Hutchison Telecommunicatio is 2.88 times more volatile than National Australia Bank. It trades about -0.03 of its potential returns per unit of risk. National Australia Bank is currently generating about -0.1 per unit of risk. If you would invest  2.80  in Hutchison Telecommunications on December 25, 2024 and sell it today you would lose (0.40) from holding Hutchison Telecommunications or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Hutchison Telecommunications  vs.  National Australia Bank

Hutchison Telecommunicatio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hutchison Telecommunications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

National Australia Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Australia Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Hutchison Telecommunicatio and National Australia

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

The idea behind Hutchison Telecommunications and National Australia Bank 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.