Correlation Between HSBC Holdings and Check Point
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Check Point 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 Check Point 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 Check Point Software, you can compare the effects of market volatilities on HSBC Holdings and Check Point 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 Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Check Point.
Diversification Opportunities for HSBC Holdings and Check Point
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between HSBC and Check is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Check Point go up and down completely randomly.
Pair Corralation between HSBC Holdings and Check Point
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 2.89 times more return on investment than Check Point. However, HSBC Holdings is 2.89 times more volatile than Check Point Software. It trades about 0.04 of its potential returns per unit of risk. Check Point Software is currently generating about 0.09 per unit of risk. If you would invest 4,677 in HSBC Holdings plc on October 11, 2024 and sell it today you would earn a total of 2,869 from holding HSBC Holdings plc or generate 61.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. Check Point Software
Performance |
| Timeline |
| HSBC Holdings plc |
| Check Point Software |
HSBC Holdings and Check Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Check Point
The main advantage of trading using opposite HSBC Holdings and Check Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Check Point 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 Check Point will offset losses from the drop in Check Point's long position.| HSBC Holdings vs. The Home Depot | HSBC Holdings vs. Tres Tentos Agroindustrial | HSBC Holdings vs. Metalrgica Riosulense SA | HSBC Holdings vs. Darden Restaurants, |
| Check Point vs. Clover Health Investments, | Check Point vs. Roper Technologies, | Check Point vs. Dell Technologies | Check Point vs. GP Investments |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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