Correlation Between HSBC MSCI and HSBC USA
Can any of the company-specific risk be diversified away by investing in both HSBC MSCI and HSBC USA 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 HSBC MSCI and HSBC USA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC MSCI China and HSBC USA Sustainable, you can compare the effects of market volatilities on HSBC MSCI and HSBC USA 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 HSBC MSCI with a short position of HSBC USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC MSCI and HSBC USA.
Diversification Opportunities for HSBC MSCI and HSBC USA
Poor diversification
The 3 months correlation between HSBC and HSBC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding HSBC MSCI China and HSBC USA Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC USA Sustainable and HSBC MSCI 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 HSBC MSCI China are associated (or correlated) with HSBC USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC USA Sustainable has no effect on the direction of HSBC MSCI i.e., HSBC MSCI and HSBC USA go up and down completely randomly.
Pair Corralation between HSBC MSCI and HSBC USA
Assuming the 90 days trading horizon HSBC MSCI China is expected to under-perform the HSBC USA. In addition to that, HSBC MSCI is 2.75 times more volatile than HSBC USA Sustainable. It trades about -0.05 of its total potential returns per unit of risk. HSBC USA Sustainable is currently generating about 0.3 per unit of volatility. If you would invest 2,837 in HSBC USA Sustainable on August 24, 2024 and sell it today you would earn a total of 121.00 from holding HSBC USA Sustainable or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC MSCI China vs. HSBC USA Sustainable
Performance |
| Timeline |
| HSBC MSCI China |
| HSBC USA Sustainable |
HSBC MSCI and HSBC USA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC MSCI and HSBC USA
The main advantage of trading using opposite HSBC MSCI and HSBC USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC MSCI position performs unexpectedly, HSBC USA 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 USA will offset losses from the drop in HSBC USA's long position.| HSBC MSCI vs. HSBC Multi Factor | HSBC MSCI vs. HSBC Emerging Market | HSBC MSCI vs. HSBC USA Sustainable | HSBC MSCI vs. HSBC MSCI Japan |
| HSBC USA vs. HSBC Multi Factor | HSBC USA vs. HSBC MSCI China | HSBC USA vs. HSBC Emerging Market | HSBC USA vs. HSBC MSCI Japan |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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