Correlation Between HSBC Holdings and Fras Le
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Fras Le 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 Fras Le 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 Fras le SA, you can compare the effects of market volatilities on HSBC Holdings and Fras Le 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 Fras Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Fras Le.
Diversification Opportunities for HSBC Holdings and Fras Le
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HSBC and Fras is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Fras le SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fras le SA 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 Fras Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fras le SA has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Fras Le go up and down completely randomly.
Pair Corralation between HSBC Holdings and Fras Le
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 2.92 times more return on investment than Fras Le. However, HSBC Holdings is 2.92 times more volatile than Fras le SA. It trades about 0.05 of its potential returns per unit of risk. Fras le SA is currently generating about 0.1 per unit of risk. If you would invest 3,358 in HSBC Holdings plc on August 24, 2024 and sell it today you would earn a total of 3,360 from holding HSBC Holdings plc or generate 100.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
HSBC Holdings plc vs. Fras le SA
Performance |
| Timeline |
| HSBC Holdings plc |
| Fras le SA |
HSBC Holdings and Fras Le Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Fras Le
The main advantage of trading using opposite HSBC Holdings and Fras Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Fras Le 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 Fras Le will offset losses from the drop in Fras Le's long position.| HSBC Holdings vs. Palantir Technologies | HSBC Holdings vs. Ross Stores | HSBC Holdings vs. Spotify Technology SA | HSBC Holdings vs. Unity Software |
| Fras Le vs. Baidu Inc | Fras Le vs. Deutsche Bank Aktiengesellschaft | Fras Le vs. HSBC Holdings plc | Fras Le vs. The Bank of |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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