Correlation Between Commonwealth Bank and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank 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 Commonwealth Bank and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank of and HSBC Holdings plc, you can compare the effects of market volatilities on Commonwealth Bank 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 Commonwealth Bank with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and HSBC Holdings.
Diversification Opportunities for Commonwealth Bank and HSBC Holdings
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Commonwealth and HSBC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of 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 Commonwealth Bank 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 Commonwealth Bank of 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 Commonwealth Bank i.e., Commonwealth Bank and HSBC Holdings go up and down completely randomly.
Pair Corralation between Commonwealth Bank and HSBC Holdings
Assuming the 90 days horizon Commonwealth Bank is expected to generate 1.24 times less return on investment than HSBC Holdings. But when comparing it to its historical volatility, Commonwealth Bank of is 1.21 times less risky than HSBC Holdings. It trades about 0.08 of its potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 499.00 in HSBC Holdings plc on September 12, 2024 and sell it today you would earn a total of 415.00 from holding HSBC Holdings plc or generate 83.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. HSBC Holdings plc
Performance |
| Timeline |
| Commonwealth Bank |
| HSBC Holdings plc |
Commonwealth Bank and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and HSBC Holdings
The main advantage of trading using opposite Commonwealth Bank and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank 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.| Commonwealth Bank vs. Aluminum of | Commonwealth Bank vs. TITANIUM TRANSPORTGROUP | Commonwealth Bank vs. Transportadora de Gas | Commonwealth Bank vs. Texas Roadhouse |
| HSBC Holdings vs. Agricultural Bank of | HSBC Holdings vs. Commonwealth Bank of | HSBC Holdings vs. Superior Plus Corp | HSBC Holdings vs. SIVERS SEMICONDUCTORS AB |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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