Correlation Between TPG Telecom and Hutchison Telecommunicatio

Can any of the company-specific risk be diversified away by investing in both TPG 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 TPG 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 TPG Telecom and Hutchison Telecommunications, you can compare the effects of market volatilities on TPG 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 TPG Telecom with a short position of Hutchison Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG Telecom and Hutchison Telecommunicatio.

Diversification Opportunities for TPG Telecom and Hutchison Telecommunicatio

0.23

Correlation Coefficient

TPG Telecom  Hutchison Telecommunicatio

Modest diversification

The 3 months correlation between TPG and Hutchison is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding TPG Telecom and Hutchison Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Telecommunicatio and TPG 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 TPG 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 TPG Telecom i.e., TPG Telecom and Hutchison Telecommunicatio go up and down completely randomly.

Pair Corralation between TPG Telecom and Hutchison Telecommunicatio

Assuming the 90 days trading horizon TPG Telecom is expected to under-perform the Hutchison Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, TPG Telecom is 2.02 times less risky than Hutchison Telecommunicatio. The stock trades about -0.07 of its potential returns per unit of risk. The Hutchison Telecommunications is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Hutchison Telecommunications on September 28, 2024 and sell it today you would earn a total of  0.30  from holding Hutchison Telecommunications or generate 12.0% return on investment over 90 days.

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

TPG Telecom  vs.  Hutchison Telecommunications

TPG Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPG Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hutchison Telecommunicatio

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with TPG Telecom and Hutchison Telecommunicatio

The main advantage of trading using opposite TPG Telecom and Hutchison Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG 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 TPG 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.