Correlation Between Kawasaki Kisen and Hutchison Port

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

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

Diversification Opportunities for Kawasaki Kisen and Hutchison Port

0.23

Correlation Coefficient

Kawasaki Kisen  Hutchison Port

Modest diversification

The 3 months correlation between Kawasaki and Hutchison is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kawasaki Kisen Kaisha and Hutchison Port Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Port Holdings and Kawasaki Kisen 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 Kawasaki Kisen Kaisha are associated (or correlated) with Hutchison Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hutchison Port Holdings has no effect on the direction of Kawasaki Kisen i.e., Kawasaki Kisen and Hutchison Port go up and down completely randomly.

Pair Corralation between Kawasaki Kisen and Hutchison Port

Assuming the 90 days horizon Kawasaki Kisen is expected to generate 5.93 times less return on investment than Hutchison Port. But when comparing it to its historical volatility, Kawasaki Kisen Kaisha is 3.05 times less risky than Hutchison Port. It trades about 0.02 of its potential returns per unit of risk. Hutchison Port Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  355.00  in Hutchison Port Holdings on December 22, 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	Very Weak
Accuracy	95.24%
Values	Daily Returns

Kawasaki Kisen Kaisha  vs.  Hutchison Port Holdings

Kawasaki Kisen Kaisha

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasaki Kisen Kaisha are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, Kawasaki Kisen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Kawasaki Kisen and Hutchison Port

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

The idea behind Kawasaki Kisen Kaisha and Hutchison Port 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.