Correlation Between Dow Jones and HSBC Hang
Can any of the company-specific risk be diversified away by investing in both Dow Jones and HSBC Hang 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 Hang 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 Hang Seng, you can compare the effects of market volatilities on Dow Jones and HSBC Hang 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 Hang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and HSBC Hang.
Diversification Opportunities for Dow Jones and HSBC Hang
Poor diversification
The 3 months correlation between Dow and HSBC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and HSBC Hang Seng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Hang Seng 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 Hang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Hang Seng has no effect on the direction of Dow Jones i.e., Dow Jones and HSBC Hang go up and down completely randomly.
Pair Corralation between Dow Jones and HSBC Hang
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.3 times more return on investment than HSBC Hang. However, Dow Jones Industrial is 3.29 times less risky than HSBC Hang. It trades about 0.08 of its potential returns per unit of risk. HSBC Hang Seng is currently generating about 0.01 per unit of risk. If you would invest 3,410,864 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 1,080,201 from holding Dow Jones Industrial or generate 31.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.06% |
| Values | Daily Returns |
Dow Jones Industrial vs. HSBC Hang Seng
Performance |
| Timeline |
Dow Jones and HSBC Hang Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
HSBC Hang Seng
Pair trading matchups for HSBC Hang
Pair Trading with Dow Jones and HSBC Hang
The main advantage of trading using opposite Dow Jones and HSBC Hang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, HSBC Hang 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 Hang will offset losses from the drop in HSBC Hang's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| HSBC Hang vs. HSBC USA SUSTAINABLE | HSBC Hang vs. HSBC MSCI Europe | HSBC Hang vs. HSBC EMERGING MARKET | HSBC Hang 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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