Correlation Between Amazon and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and HSBC Holdings plc, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and HSBC Holdings.
Diversification Opportunities for Amazon and HSBC Holdings
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and HSBC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and HSBC Holdings go up and down completely randomly.
Pair Corralation between Amazon and HSBC Holdings
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.84 times more return on investment than HSBC Holdings. However, Amazon Inc is 1.2 times less risky than HSBC Holdings. It trades about 0.19 of its potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.1 per unit of risk. If you would invest 349,694 in Amazon Inc on November 2, 2024 and sell it today you would earn a total of 133,892 from holding Amazon Inc or generate 38.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.03% |
| Values | Daily Returns |
Amazon Inc vs. HSBC Holdings plc
Performance |
| Timeline |
| Amazon Inc |
| HSBC Holdings plc |
Amazon and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and HSBC Holdings
The main advantage of trading using opposite Amazon and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.| Amazon vs. GMxico Transportes SAB | Amazon vs. DXC Technology | Amazon vs. Ameriprise Financial | Amazon vs. Taiwan Semiconductor Manufacturing |
| HSBC Holdings vs. Capital One Financial | HSBC Holdings vs. Southern Copper | HSBC Holdings vs. Prudential Financial | HSBC Holdings vs. Lloyds Banking Group |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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