Correlation Between Erste Group and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Erste Group and HSBC Holdings 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 Erste Group and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erste Group Bank and HSBC Holdings PLC, you can compare the effects of market volatilities on Erste Group and HSBC Holdings 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 Erste Group with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and HSBC Holdings.
Diversification Opportunities for Erste Group and HSBC Holdings
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Erste and HSBC is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and HSBC Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings PLC and Erste Group 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 Erste Group Bank are associated (or correlated) with HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings PLC has no effect on the direction of Erste Group i.e., Erste Group and HSBC Holdings go up and down completely randomly.
Pair Corralation between Erste Group and HSBC Holdings
Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.13 times more return on investment than HSBC Holdings. However, Erste Group is 1.13 times more volatile than HSBC Holdings PLC. It trades about 0.1 of its potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.08 per unit of risk. If you would invest 2,957 in Erste Group Bank on October 14, 2024 and sell it today you would earn a total of 3,074 from holding Erste Group Bank or generate 103.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.4% |
| Values | Daily Returns |
Erste Group Bank vs. HSBC Holdings PLC
Performance |
| Timeline |
| Erste Group Bank |
| HSBC Holdings PLC |
Erste Group and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and HSBC Holdings
The main advantage of trading using opposite Erste Group and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, HSBC Holdings 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 HSBC Holdings will offset losses from the drop in HSBC Holdings' long position.| Erste Group vs. Premier Foods PLC | Erste Group vs. British American Tobacco | Erste Group vs. Science in Sport | Erste Group vs. United Utilities Group |
| HSBC Holdings vs. Tetragon Financial Group | HSBC Holdings vs. FinecoBank SpA | HSBC Holdings vs. Erste Group Bank | HSBC Holdings vs. Synchrony Financial |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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