Correlation Between Premier Foods and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Premier Foods 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 Premier Foods and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Foods PLC and HSBC Holdings plc, you can compare the effects of market volatilities on Premier Foods 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 Premier Foods with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and HSBC Holdings.
Diversification Opportunities for Premier Foods and HSBC Holdings
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Premier and HSBC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods 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 Premier Foods 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 Premier Foods 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 Premier Foods i.e., Premier Foods and HSBC Holdings go up and down completely randomly.
Pair Corralation between Premier Foods and HSBC Holdings
Assuming the 90 days trading horizon Premier Foods is expected to generate 1.04 times less return on investment than HSBC Holdings. But when comparing it to its historical volatility, Premier Foods PLC is 1.12 times less risky than HSBC Holdings. It trades about 0.09 of its potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,432 in HSBC Holdings plc on September 12, 2024 and sell it today you would earn a total of 2,148 from holding HSBC Holdings plc or generate 88.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premier Foods PLC vs. HSBC Holdings plc
Performance |
| Timeline |
| Premier Foods PLC |
| HSBC Holdings plc |
Premier Foods and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and HSBC Holdings
The main advantage of trading using opposite Premier Foods and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods 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.| Premier Foods vs. REVO INSURANCE SPA | Premier Foods vs. TELES Informationstechnologien AG | Premier Foods vs. DOCDATA | Premier Foods vs. PUBLIC STORAGE PRFO |
| HSBC Holdings vs. SOUTHWEST AIRLINES | HSBC Holdings vs. Nok Airlines PCL | HSBC Holdings vs. Regions Financial | HSBC Holdings vs. ALIOR BANK |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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