Correlation Between ZIM Integrated and Hutchison Port

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

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

Diversification Opportunities for ZIM Integrated and Hutchison Port

0.07

Correlation Coefficient

ZIM Integrated  Hutchison Port

Significant diversification

The 3 months correlation between ZIM and Hutchison is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ZIM Integrated Shipping 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 ZIM Integrated 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 ZIM Integrated Shipping 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 ZIM Integrated i.e., ZIM Integrated and Hutchison Port go up and down completely randomly.

Pair Corralation between ZIM Integrated and Hutchison Port

Considering the 90-day investment horizon ZIM Integrated Shipping is expected to under-perform the Hutchison Port. But the stock apears to be less risky and, when comparing its historical volatility, ZIM Integrated Shipping is 1.34 times less risky than Hutchison Port. The stock trades about -0.05 of its potential returns per unit of risk. The Hutchison Port Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  281.00  in Hutchison Port Holdings on September 15, 2024 and sell it today you would earn a total of  14.00  from holding Hutchison Port Holdings or generate 4.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

ZIM Integrated Shipping  vs.  Hutchison Port Holdings

ZIM Integrated Shipping

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZIM Integrated Shipping are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward indicators, ZIM Integrated displayed solid returns over the last few months and may actually be approaching a breakup point.

Hutchison Port Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

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 weak technical indicators, Hutchison Port may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ZIM Integrated and Hutchison Port

The main advantage of trading using opposite ZIM Integrated and Hutchison Port positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZIM Integrated 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 ZIM Integrated Shipping 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.