Correlation Between Resource Base and Hutchison Telecommunicatio

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

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

Diversification Opportunities for Resource Base and Hutchison Telecommunicatio

-0.27

Correlation Coefficient

Resource Base  Hutchison Telecommunicatio

Very good diversification

The 3 months correlation between Resource and Hutchison is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Resource Base and Hutchison Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Telecommunicatio and Resource Base 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 Resource Base are associated (or correlated) with Hutchison Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hutchison Telecommunicatio has no effect on the direction of Resource Base i.e., Resource Base and Hutchison Telecommunicatio go up and down completely randomly.

Pair Corralation between Resource Base and Hutchison Telecommunicatio

Assuming the 90 days trading horizon Resource Base is expected to under-perform the Hutchison Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Resource Base is 1.46 times less risky than Hutchison Telecommunicatio. The stock trades about -0.04 of its potential returns per unit of risk. The Hutchison Telecommunications is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3.60  in Hutchison Telecommunications on October 9, 2024 and sell it today you would lose (0.90) from holding Hutchison Telecommunications or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Resource Base  vs.  Hutchison Telecommunications

Resource Base

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Resource Base are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Resource Base may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Resource Base and Hutchison Telecommunicatio

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

The idea behind Resource Base and Hutchison Telecommunications 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.