Correlation Between Hutchison Telecommunicatio and Wesfarmers

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

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

Diversification Opportunities for Hutchison Telecommunicatio and Wesfarmers

-0.58

Correlation Coefficient

Hutchison Telecommunicatio  Wesfarmers

Excellent diversification

The 3 months correlation between Hutchison and Wesfarmers is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Telecommunications and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers 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 Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers has no effect on the direction of Hutchison Telecommunicatio i.e., Hutchison Telecommunicatio and Wesfarmers go up and down completely randomly.

Pair Corralation between Hutchison Telecommunicatio and Wesfarmers

Assuming the 90 days trading horizon Hutchison Telecommunicatio is expected to generate 9.24 times less return on investment than Wesfarmers. In addition to that, Hutchison Telecommunicatio is 2.35 times more volatile than Wesfarmers. It trades about 0.01 of its total potential returns per unit of risk. Wesfarmers is currently generating about 0.25 per unit of volatility. If you would invest  6,981  in Wesfarmers on September 15, 2024 and sell it today you would earn a total of  384.00  from holding Wesfarmers or generate 5.5% 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.  Wesfarmers

Hutchison Telecommunicatio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hutchison Telecommunications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Wesfarmers

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wesfarmers are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Wesfarmers is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hutchison Telecommunicatio and Wesfarmers

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

The idea behind Hutchison Telecommunications and Wesfarmers 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 Anywhere module to track or share privately all of your investments from the convenience of any device.