Correlation Between CK Hutchison and China Overseas

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

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

Diversification Opportunities for CK Hutchison and China Overseas

0.43

Correlation Coefficient

CK Hutchison  China Overseas

Very weak diversification

The 3 months correlation between CKHUF and China is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CK Hutchison Holdings and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and CK Hutchison 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 CK Hutchison Holdings are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of CK Hutchison i.e., CK Hutchison and China Overseas go up and down completely randomly.

Pair Corralation between CK Hutchison and China Overseas

Assuming the 90 days horizon CK Hutchison is expected to generate 33.71 times less return on investment than China Overseas. But when comparing it to its historical volatility, CK Hutchison Holdings is 1.7 times less risky than China Overseas. It trades about 0.0 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  740.00  in China Overseas Land on September 3, 2024 and sell it today you would earn a total of  114.00  from holding China Overseas Land or generate 15.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

CK Hutchison Holdings  vs.  China Overseas Land

CK Hutchison Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CK Hutchison Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CK Hutchison is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Overseas Land

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, China Overseas showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CK Hutchison and China Overseas

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

The idea behind CK Hutchison Holdings and China Overseas Land 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.