Correlation Between EasyJet PLC and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both EasyJet PLC 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 EasyJet PLC and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EasyJet PLC and HSBC Holdings PLC, you can compare the effects of market volatilities on EasyJet PLC 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 EasyJet PLC with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of EasyJet PLC and HSBC Holdings.
Diversification Opportunities for EasyJet PLC and HSBC Holdings
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EasyJet and HSBC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding EasyJet PLC 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 EasyJet PLC 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 EasyJet PLC 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 EasyJet PLC i.e., EasyJet PLC and HSBC Holdings go up and down completely randomly.
Pair Corralation between EasyJet PLC and HSBC Holdings
Assuming the 90 days trading horizon EasyJet PLC is expected to generate 1.63 times more return on investment than HSBC Holdings. However, EasyJet PLC is 1.63 times more volatile than HSBC Holdings PLC. It trades about 0.06 of its potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.09 per unit of risk. If you would invest 32,733 in EasyJet PLC on September 23, 2024 and sell it today you would earn a total of 24,427 from holding EasyJet PLC or generate 74.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.4% |
| Values | Daily Returns |
EasyJet PLC vs. HSBC Holdings PLC
Performance |
| Timeline |
| EasyJet PLC |
| HSBC Holdings PLC |
EasyJet PLC and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EasyJet PLC and HSBC Holdings
The main advantage of trading using opposite EasyJet PLC and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EasyJet PLC 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.| EasyJet PLC vs. Cornish Metals | EasyJet PLC vs. Europa Metals | EasyJet PLC vs. Gaztransport et Technigaz | EasyJet PLC vs. Empire Metals Limited |
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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 Stocks Directory module to find actively traded stocks across global markets.
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