Correlation Between Sparebank and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Sparebank 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 Sparebank and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SR and HSBC Holdings PLC, you can compare the effects of market volatilities on Sparebank 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 Sparebank with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and HSBC Holdings.
Diversification Opportunities for Sparebank and HSBC Holdings
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sparebank and HSBC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR 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 Sparebank 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 Sparebank 1 SR 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 Sparebank i.e., Sparebank and HSBC Holdings go up and down completely randomly.
Pair Corralation between Sparebank and HSBC Holdings
Assuming the 90 days trading horizon Sparebank is expected to generate 1.2 times less return on investment than HSBC Holdings. In addition to that, Sparebank is 1.04 times more volatile than HSBC Holdings PLC. It trades about 0.06 of its total potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.08 per unit of volatility. If you would invest 50,083 in HSBC Holdings PLC on October 11, 2024 and sell it today you would earn a total of 29,037 from holding HSBC Holdings PLC or generate 57.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Sparebank 1 SR vs. HSBC Holdings PLC
Performance |
| Timeline |
| Sparebank 1 SR |
| HSBC Holdings PLC |
Sparebank and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and HSBC Holdings
The main advantage of trading using opposite Sparebank and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank 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.| Sparebank vs. Zegona Communications Plc | Sparebank vs. Axfood AB | Sparebank vs. Tyson Foods Cl | Sparebank vs. Dairy Farm International |
| HSBC Holdings vs. Nordea Bank Abp | HSBC Holdings vs. Naked Wines plc | HSBC Holdings vs. Virgin Wines UK | HSBC Holdings vs. Sparebank 1 SR |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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