Correlation Between HSBC Holdings and Illumina
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Illumina 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 Illumina 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 Illumina, you can compare the effects of market volatilities on HSBC Holdings and Illumina 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 Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Illumina.
Diversification Opportunities for HSBC Holdings and Illumina
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HSBC and Illumina is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Illumina go up and down completely randomly.
Pair Corralation between HSBC Holdings and Illumina
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.87 times more return on investment than Illumina. However, HSBC Holdings plc is 1.15 times less risky than Illumina. It trades about 0.18 of its potential returns per unit of risk. Illumina is currently generating about -0.05 per unit of risk. If you would invest 6,722 in HSBC Holdings plc on September 2, 2024 and sell it today you would earn a total of 333.00 from holding HSBC Holdings plc or generate 4.95% 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. Illumina
Performance |
| Timeline |
| HSBC Holdings plc |
| Illumina |
HSBC Holdings and Illumina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Illumina
The main advantage of trading using opposite HSBC Holdings and Illumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Illumina 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 Illumina will offset losses from the drop in Illumina's long position.| HSBC Holdings vs. Global X Funds | HSBC Holdings vs. G2D Investments | HSBC Holdings vs. Cognizant Technology Solutions | HSBC Holdings vs. The Home Depot |
| Illumina vs. Verizon Communications | Illumina vs. T Mobile | Illumina vs. Deutsche Bank Aktiengesellschaft | Illumina vs. Zoom Video Communications |
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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