Correlation Between Hutchison Telecommunicatio and Westpac Banking

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

By analyzing existing cross correlation between Hutchison Telecommunications and Westpac Banking Corp, you can compare the effects of market volatilities on Hutchison Telecommunicatio and Westpac Banking 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 Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hutchison Telecommunicatio and Westpac Banking.

Diversification Opportunities for Hutchison Telecommunicatio and Westpac Banking

-0.4

Correlation Coefficient

Hutchison Telecommunicatio  Westpac Banking

Very good diversification

The 3 months correlation between Hutchison and Westpac is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and Westpac Banking Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking Corp 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 Westpac Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westpac Banking Corp has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and Westpac Banking go up and down completely randomly.

Pair Corralation between Hutchison Telecommunicatio and Westpac Banking

Assuming the 90 days trading horizon Hutchison Telecommunicatio is expected to generate 2.26 times less return on investment than Westpac Banking. In addition to that, Hutchison Telecommunicatio is 5.64 times more volatile than Westpac Banking Corp. It trades about 0.01 of its total potential returns per unit of risk. Westpac Banking Corp is currently generating about 0.15 per unit of volatility. If you would invest  2,196  in Westpac Banking Corp on October 7, 2024 and sell it today you would earn a total of  1,068  from holding Westpac Banking Corp or generate 48.63% return on investment over 90 days.

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

Hutchison Telecommunications  vs.  Westpac Banking Corp

Hutchison Telecommunicatio

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Hutchison Telecommunicatio is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Westpac Banking Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Westpac Banking may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hutchison Telecommunicatio and Westpac Banking

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

The idea behind Hutchison Telecommunications and Westpac Banking Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.