Correlation Between HSBC Holdings and British American
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and British American 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 HSBC Holdings and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings plc and British American Tobacco, you can compare the effects of market volatilities on HSBC Holdings and British American 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 HSBC Holdings with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and British American.
Diversification Opportunities for HSBC Holdings and British American
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HSBC and British is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and HSBC Holdings 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 HSBC Holdings plc are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and British American go up and down completely randomly.
Pair Corralation between HSBC Holdings and British American
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 1.09 times more return on investment than British American. However, HSBC Holdings is 1.09 times more volatile than British American Tobacco. It trades about 0.36 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.35 per unit of risk. If you would invest 6,243 in HSBC Holdings plc on September 19, 2024 and sell it today you would earn a total of 1,177 from holding HSBC Holdings plc or generate 18.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.56% |
| Values | Daily Returns |
HSBC Holdings plc vs. British American Tobacco
Performance |
| Timeline |
| HSBC Holdings plc |
| British American Tobacco |
HSBC Holdings and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and British American
The main advantage of trading using opposite HSBC Holdings and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| HSBC Holdings vs. Wells Fargo | HSBC Holdings vs. Barclays PLC | HSBC Holdings vs. BTG Pactual Logstica | HSBC Holdings vs. Plano Plano Desenvolvimento |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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