Correlation Between IShares Trust and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both IShares Trust 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 IShares Trust and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and HSBC Holdings plc, you can compare the effects of market volatilities on IShares Trust 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 IShares Trust with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and HSBC Holdings.
Diversification Opportunities for IShares Trust and HSBC Holdings
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and HSBC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust 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 IShares Trust 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 iShares Trust 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 IShares Trust i.e., IShares Trust and HSBC Holdings go up and down completely randomly.
Pair Corralation between IShares Trust and HSBC Holdings
Assuming the 90 days trading horizon iShares Trust is expected to under-perform the HSBC Holdings. In addition to that, IShares Trust is 5.06 times more volatile than HSBC Holdings plc. It trades about -0.26 of its total potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.22 per unit of volatility. If you would invest 92,494 in HSBC Holdings plc on September 4, 2024 and sell it today you would earn a total of 1,006 from holding HSBC Holdings plc or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. HSBC Holdings plc
Performance |
| Timeline |
| iShares Trust |
| HSBC Holdings plc |
IShares Trust and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and HSBC Holdings
The main advantage of trading using opposite IShares Trust and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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.| IShares Trust vs. Vanguard Index Funds | IShares Trust vs. Vanguard Index Funds | IShares Trust vs. Vanguard STAR Funds | IShares Trust vs. SPDR SP 500 |
| HSBC Holdings vs. United States Steel | HSBC Holdings vs. FIBRA Storage | HSBC Holdings vs. Micron Technology | HSBC Holdings vs. Delta Air Lines |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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