Correlation Between China Overseas and CK Hutchison

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

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

Diversification Opportunities for China Overseas and CK Hutchison

0.18

Correlation Coefficient

China Overseas  CK Hutchison

Average diversification

The 3 months correlation between China and CKHUF is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding China Overseas Land and CK Hutchison Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CK Hutchison Holdings and China Overseas 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 China Overseas Land are associated (or correlated) with CK Hutchison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CK Hutchison Holdings has no effect on the direction of China Overseas i.e., China Overseas and CK Hutchison go up and down completely randomly.

Pair Corralation between China Overseas and CK Hutchison

Assuming the 90 days horizon China Overseas Land is expected to under-perform the CK Hutchison. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Overseas Land is 1.39 times less risky than CK Hutchison. The pink sheet trades about -0.06 of its potential returns per unit of risk. The CK Hutchison Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  637.00  in CK Hutchison Holdings on March 6, 2025 and sell it today you would lose (77.00) from holding CK Hutchison Holdings or give up 12.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

China Overseas Land  vs.  CK Hutchison Holdings

China Overseas Land

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Overseas Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CK Hutchison Holdings

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with China Overseas and CK Hutchison

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

The idea behind China Overseas Land and CK Hutchison 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.