Correlation Between Transurban and Hutchison Telecommunicatio

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

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

Diversification Opportunities for Transurban and Hutchison Telecommunicatio

0.54

Correlation Coefficient

Transurban  Hutchison Telecommunicatio

Very weak diversification

The 3 months correlation between Transurban and Hutchison is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Transurban Group and Hutchison Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Telecommunicatio and Transurban 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 Transurban Group 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 Transurban i.e., Transurban and Hutchison Telecommunicatio go up and down completely randomly.

Pair Corralation between Transurban and Hutchison Telecommunicatio

Assuming the 90 days trading horizon Transurban Group is expected to generate 0.23 times more return on investment than Hutchison Telecommunicatio. However, Transurban Group is 4.41 times less risky than Hutchison Telecommunicatio. It trades about -0.06 of its potential returns per unit of risk. Hutchison Telecommunications is currently generating about -0.03 per unit of risk. If you would invest  1,350  in Transurban Group on December 25, 2024 and sell it today you would lose (56.00) from holding Transurban Group or give up 4.15% of portfolio value over 90 days.

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

Transurban Group  vs.  Hutchison Telecommunications

Transurban Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transurban Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Transurban 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

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 Transurban and Hutchison Telecommunicatio

The main advantage of trading using opposite Transurban and Hutchison Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transurban 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 Transurban Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.