Correlation Between European Metals and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both European Metals 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 European Metals and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and HSBC Holdings PLC, you can compare the effects of market volatilities on European Metals 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 European Metals with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and HSBC Holdings.
Diversification Opportunities for European Metals and HSBC Holdings
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between European and HSBC is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings 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 European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and HSBC Holdings go up and down completely randomly.
Pair Corralation between European Metals and HSBC Holdings
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the HSBC Holdings. In addition to that, European Metals is 2.83 times more volatile than HSBC Holdings PLC. It trades about -0.07 of its total potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.09 per unit of volatility. If you would invest 44,784 in HSBC Holdings PLC on September 23, 2024 and sell it today you would earn a total of 31,296 from holding HSBC Holdings PLC or generate 69.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
European Metals Holdings vs. HSBC Holdings PLC
Performance |
| Timeline |
| European Metals Holdings |
| HSBC Holdings PLC |
European Metals and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and HSBC Holdings
The main advantage of trading using opposite European Metals and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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.| European Metals vs. STMicroelectronics NV | European Metals vs. Worldwide Healthcare Trust | European Metals vs. Taiwan Semiconductor Manufacturing | European Metals vs. HCA Healthcare |
| HSBC Holdings vs. Samsung Electronics Co | HSBC Holdings vs. Samsung Electronics Co | HSBC Holdings vs. Hyundai Motor | HSBC Holdings vs. Toyota Motor Corp |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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