Correlation Between Spirit Telecom and Hutchison Telecommunicatio

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

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

Diversification Opportunities for Spirit Telecom and Hutchison Telecommunicatio

-0.25

Correlation Coefficient

Spirit Telecom  Hutchison Telecommunicatio

Very good diversification

The 3 months correlation between Spirit and Hutchison is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Telecom and Hutchison Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Telecommunicatio and Spirit Telecom 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 Spirit Telecom 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 Spirit Telecom i.e., Spirit Telecom and Hutchison Telecommunicatio go up and down completely randomly.

Pair Corralation between Spirit Telecom and Hutchison Telecommunicatio

Assuming the 90 days trading horizon Spirit Telecom is expected to generate 0.89 times more return on investment than Hutchison Telecommunicatio. However, Spirit Telecom is 1.13 times less risky than Hutchison Telecommunicatio. It trades about 0.02 of its potential returns per unit of risk. Hutchison Telecommunications is currently generating about -0.01 per unit of risk. If you would invest  63.00  in Spirit Telecom on October 10, 2024 and sell it today you would lose (8.00) from holding Spirit Telecom or give up 12.7% of portfolio value over 90 days.

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

Spirit Telecom  vs.  Hutchison Telecommunications

Spirit Telecom

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spirit Telecom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Spirit Telecom is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Spirit Telecom and Hutchison Telecommunicatio

The main advantage of trading using opposite Spirit Telecom and Hutchison Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Telecom 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 Spirit Telecom 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 Transaction History module to view history of all your transactions and understand their impact on performance.