Correlation Between Western Bulk and Hutchison Port

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

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

Diversification Opportunities for Western Bulk and Hutchison Port

-0.33

Correlation Coefficient

Western Bulk  Hutchison Port

Very good diversification

The 3 months correlation between Western and Hutchison is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Western Bulk Chartering and Hutchison Port Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hutchison Port Holdings and Western Bulk 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 Western Bulk Chartering are associated (or correlated) with Hutchison Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hutchison Port Holdings has no effect on the direction of Western Bulk i.e., Western Bulk and Hutchison Port go up and down completely randomly.

Pair Corralation between Western Bulk and Hutchison Port

Assuming the 90 days horizon Western Bulk Chartering is expected to under-perform the Hutchison Port. But the pink sheet apears to be less risky and, when comparing its historical volatility, Western Bulk Chartering is 1.05 times less risky than Hutchison Port. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Hutchison Port Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  277.00  in Hutchison Port Holdings on September 14, 2024 and sell it today you would earn a total of  18.00  from holding Hutchison Port Holdings or generate 6.5% return on investment over 90 days.

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

Western Bulk Chartering  vs.  Hutchison Port Holdings

Western Bulk Chartering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Bulk Chartering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hutchison Port Holdings

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hutchison Port Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Hutchison Port may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Western Bulk and Hutchison Port

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

The idea behind Western Bulk Chartering and Hutchison Port Holdings 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.