Correlation Between Applied Materials and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and HSBC Holdings plc, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and HSBC Holdings.
Diversification Opportunities for Applied Materials and HSBC Holdings
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and HSBC is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and HSBC Holdings go up and down completely randomly.
Pair Corralation between Applied Materials and HSBC Holdings
Assuming the 90 days trading horizon Applied Materials is expected to generate 15.85 times less return on investment than HSBC Holdings. In addition to that, Applied Materials is 1.22 times more volatile than HSBC Holdings plc. It trades about 0.01 of its total potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.11 per unit of volatility. If you would invest 69,873 in HSBC Holdings plc on September 1, 2024 and sell it today you would earn a total of 23,627 from holding HSBC Holdings plc or generate 33.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. HSBC Holdings plc
Performance |
| Timeline |
| Applied Materials |
| HSBC Holdings plc |
Applied Materials and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and HSBC Holdings
The main advantage of trading using opposite Applied Materials and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. FIBRA Storage | Applied Materials vs. Monster Beverage Corp | Applied Materials vs. GMxico Transportes SAB | Applied Materials vs. Costco Wholesale |
| HSBC Holdings vs. Cognizant Technology Solutions | HSBC Holdings vs. Delta Air Lines | HSBC Holdings vs. Monster Beverage Corp | HSBC Holdings vs. McEwen Mining |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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