Correlation Between HSBC Holdings and F1RA34
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and F1RA34 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 F1RA34 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 F1RA34, you can compare the effects of market volatilities on HSBC Holdings and F1RA34 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 F1RA34. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and F1RA34.
Diversification Opportunities for HSBC Holdings and F1RA34
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HSBC and F1RA34 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and F1RA34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F1RA34 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 F1RA34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F1RA34 has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and F1RA34 go up and down completely randomly.
Pair Corralation between HSBC Holdings and F1RA34
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.64 times more return on investment than F1RA34. However, HSBC Holdings plc is 1.57 times less risky than F1RA34. It trades about 0.13 of its potential returns per unit of risk. F1RA34 is currently generating about 0.05 per unit of risk. If you would invest 6,066 in HSBC Holdings plc on September 27, 2024 and sell it today you would earn a total of 1,627 from holding HSBC Holdings plc or generate 26.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. F1RA34
Performance |
| Timeline |
| HSBC Holdings plc |
| F1RA34 |
HSBC Holdings and F1RA34 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and F1RA34
The main advantage of trading using opposite HSBC Holdings and F1RA34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, F1RA34 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 F1RA34 will offset losses from the drop in F1RA34's long position.| HSBC Holdings vs. Barclays PLC | HSBC Holdings vs. N1WG34 | HSBC Holdings vs. Palantir Technologies | HSBC Holdings vs. WEG SA |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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