Correlation Between Baidu and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Baidu 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 Baidu and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and HSBC Holdings plc, you can compare the effects of market volatilities on Baidu 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 Baidu with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and HSBC Holdings.
Diversification Opportunities for Baidu and HSBC Holdings
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Baidu and HSBC is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Baidu 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 Baidu 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 Baidu 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 Baidu i.e., Baidu and HSBC Holdings go up and down completely randomly.
Pair Corralation between Baidu and HSBC Holdings
Assuming the 90 days trading horizon Baidu Inc is expected to under-perform the HSBC Holdings. In addition to that, Baidu is 1.6 times more volatile than HSBC Holdings plc. It trades about -0.21 of its total potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.22 per unit of volatility. If you would invest 6,385 in HSBC Holdings plc on August 28, 2024 and sell it today you would earn a total of 405.00 from holding HSBC Holdings plc or generate 6.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. HSBC Holdings plc
Performance |
| Timeline |
| Baidu Inc |
| HSBC Holdings plc |
Baidu and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and HSBC Holdings
The main advantage of trading using opposite Baidu and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu 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.The idea behind Baidu Inc and HSBC Holdings plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| HSBC Holdings vs. BTG Pactual Logstica | HSBC Holdings vs. Plano Plano Desenvolvimento | HSBC Holdings vs. Cable One | HSBC Holdings vs. ATMA Participaes SA |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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