Correlation Between Hutchison Port and Nippon Yusen

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

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

Diversification Opportunities for Hutchison Port and Nippon Yusen

0.57

Correlation Coefficient

Hutchison Port  Nippon Yusen

Very weak diversification

The 3 months correlation between Hutchison and Nippon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hutchison Port Holdings and Nippon Yusen Kabushiki in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Yusen Kabushiki and Hutchison Port 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 Port Holdings are associated (or correlated) with Nippon Yusen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Yusen Kabushiki has no effect on the direction of Hutchison Port i.e., Hutchison Port and Nippon Yusen go up and down completely randomly.

Pair Corralation between Hutchison Port and Nippon Yusen

Assuming the 90 days horizon Hutchison Port Holdings is expected to generate 3.75 times more return on investment than Nippon Yusen. However, Hutchison Port is 3.75 times more volatile than Nippon Yusen Kabushiki. It trades about 0.04 of its potential returns per unit of risk. Nippon Yusen Kabushiki is currently generating about 0.03 per unit of risk. If you would invest  355.00  in Hutchison Port Holdings on December 30, 2024 and sell it today you would earn a total of  19.00  from holding Hutchison Port Holdings or generate 5.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Hutchison Port Holdings  vs.  Nippon Yusen Kabushiki

Hutchison Port Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hutchison Port Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Hutchison Port showed solid returns over the last few months and may actually be approaching a breakup point.

Nippon Yusen Kabushiki

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Yusen Kabushiki are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Nippon Yusen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hutchison Port and Nippon Yusen

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

The idea behind Hutchison Port Holdings and Nippon Yusen Kabushiki 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.