Correlation Between Barclays PLC and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Barclays PLC 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 Barclays PLC and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barclays PLC and HSBC Holdings plc, you can compare the effects of market volatilities on Barclays PLC 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 Barclays PLC with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays PLC and HSBC Holdings.
Diversification Opportunities for Barclays PLC and HSBC Holdings
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Barclays and HSBC is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC 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 Barclays PLC 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 Barclays PLC 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 Barclays PLC i.e., Barclays PLC and HSBC Holdings go up and down completely randomly.
Pair Corralation between Barclays PLC and HSBC Holdings
Assuming the 90 days trading horizon Barclays PLC is expected to generate 3.44 times less return on investment than HSBC Holdings. But when comparing it to its historical volatility, Barclays PLC is 3.19 times less risky than HSBC Holdings. It trades about 0.22 of its potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 76,171 in HSBC Holdings plc on August 26, 2024 and sell it today you would earn a total of 17,329 from holding HSBC Holdings plc or generate 22.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Barclays PLC vs. HSBC Holdings plc
Performance |
| Timeline |
| Barclays PLC |
| HSBC Holdings plc |
Barclays PLC and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barclays PLC and HSBC Holdings
The main advantage of trading using opposite Barclays PLC and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays PLC 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.| Barclays PLC vs. Hoteles City Express | Barclays PLC vs. Verizon Communications | Barclays PLC vs. The Bank of | Barclays PLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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