Correlation Between Dow Jones and HSBC MSCI
Can any of the company-specific risk be diversified away by investing in both Dow Jones and HSBC MSCI 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 MSCI 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 MSCI Taiwan, you can compare the effects of market volatilities on Dow Jones and HSBC MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and HSBC MSCI.
Diversification Opportunities for Dow Jones and HSBC MSCI
Very weak diversification
The 3 months correlation between Dow and HSBC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and HSBC MSCI Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI Taiwan 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI Taiwan has no effect on the direction of Dow Jones i.e., Dow Jones and HSBC MSCI go up and down completely randomly.
Pair Corralation between Dow Jones and HSBC MSCI
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.36 times less return on investment than HSBC MSCI. But when comparing it to its historical volatility, Dow Jones Industrial is 1.85 times less risky than HSBC MSCI. It trades about 0.08 of its potential returns per unit of risk. HSBC MSCI Taiwan is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,409 in HSBC MSCI Taiwan on September 3, 2024 and sell it today you would earn a total of 2,258 from holding HSBC MSCI Taiwan or generate 41.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Dow Jones Industrial vs. HSBC MSCI Taiwan
Performance |
| Timeline |
Dow Jones and HSBC MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
HSBC MSCI Taiwan
Pair trading matchups for HSBC MSCI
Pair Trading with Dow Jones and HSBC MSCI
The main advantage of trading using opposite Dow Jones and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, HSBC MSCI 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 MSCI will offset losses from the drop in HSBC MSCI's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| HSBC MSCI vs. UBSFund Solutions MSCI | HSBC MSCI vs. Vanguard SP 500 | HSBC MSCI vs. iShares VII PLC | HSBC MSCI vs. iShares Core SP |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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