Correlation Between Ford and HSBC Asia
Can any of the company-specific risk be diversified away by investing in both Ford and HSBC Asia 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 Ford and HSBC Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and HSBC Asia Pacific, you can compare the effects of market volatilities on Ford and HSBC Asia 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 Ford with a short position of HSBC Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and HSBC Asia.
Diversification Opportunities for Ford and HSBC Asia
Good diversification
The 3 months correlation between Ford and HSBC is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and HSBC Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Asia Pacific and Ford 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 Ford Motor are associated (or correlated) with HSBC Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Asia Pacific has no effect on the direction of Ford i.e., Ford and HSBC Asia go up and down completely randomly.
Pair Corralation between Ford and HSBC Asia
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.67 times more return on investment than HSBC Asia. However, Ford is 1.67 times more volatile than HSBC Asia Pacific. It trades about 0.25 of its potential returns per unit of risk. HSBC Asia Pacific is currently generating about -0.08 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. HSBC Asia Pacific
Performance |
| Timeline |
| Ford Motor |
| HSBC Asia Pacific |
Ford and HSBC Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and HSBC Asia
The main advantage of trading using opposite Ford and HSBC Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, HSBC Asia 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 Asia will offset losses from the drop in HSBC Asia's long position.The idea behind Ford Motor and HSBC Asia Pacific pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| HSBC Asia vs. HSBC FTSE EPRA | HSBC Asia vs. HSBC SP 500 | HSBC Asia vs. HSBC MSCI Emerging | HSBC Asia vs. HSBC NASDAQ Global |
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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