Correlation Between Dow Jones and HSBC EMERGING
Can any of the company-specific risk be diversified away by investing in both Dow Jones and HSBC EMERGING 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 Dow Jones and HSBC EMERGING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and HSBC EMERGING MARKET, you can compare the effects of market volatilities on Dow Jones and HSBC EMERGING 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 Dow Jones with a short position of HSBC EMERGING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and HSBC EMERGING.
Diversification Opportunities for Dow Jones and HSBC EMERGING
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and HSBC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and HSBC EMERGING MARKET in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC EMERGING MARKET and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with HSBC EMERGING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC EMERGING MARKET has no effect on the direction of Dow Jones i.e., Dow Jones and HSBC EMERGING go up and down completely randomly.
Pair Corralation between Dow Jones and HSBC EMERGING
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.83 times more return on investment than HSBC EMERGING. However, Dow Jones Industrial is 1.2 times less risky than HSBC EMERGING. It trades about 0.37 of its potential returns per unit of risk. HSBC EMERGING MARKET is currently generating about -0.12 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. HSBC EMERGING MARKET
Performance |
| Timeline |
Dow Jones and HSBC EMERGING Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
HSBC EMERGING MARKET
Pair trading matchups for HSBC EMERGING
Pair Trading with Dow Jones and HSBC EMERGING
The main advantage of trading using opposite Dow Jones and HSBC EMERGING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, HSBC EMERGING 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 EMERGING will offset losses from the drop in HSBC EMERGING's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| HSBC EMERGING vs. iShares Core SP | HSBC EMERGING vs. iShares Core MSCI | HSBC EMERGING vs. Lyxor UCITS Stoxx |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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