Correlation Between HSBC Holdings and Magazine Luiza
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Magazine Luiza 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 Magazine Luiza 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 Magazine Luiza SA, you can compare the effects of market volatilities on HSBC Holdings and Magazine Luiza 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 Magazine Luiza. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Magazine Luiza.
Diversification Opportunities for HSBC Holdings and Magazine Luiza
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HSBC and Magazine is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza 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 Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Magazine Luiza go up and down completely randomly.
Pair Corralation between HSBC Holdings and Magazine Luiza
Assuming the 90 days trading horizon HSBC Holdings is expected to generate 5.9 times less return on investment than Magazine Luiza. But when comparing it to its historical volatility, HSBC Holdings plc is 8.78 times less risky than Magazine Luiza. It trades about 0.05 of its potential returns per unit of risk. Magazine Luiza SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,940 in Magazine Luiza SA on August 28, 2024 and sell it today you would lose (1,939) from holding Magazine Luiza SA or give up 65.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. Magazine Luiza SA
Performance |
| Timeline |
| HSBC Holdings plc |
| Magazine Luiza SA |
HSBC Holdings and Magazine Luiza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Magazine Luiza
The main advantage of trading using opposite HSBC Holdings and Magazine Luiza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Magazine Luiza 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 Magazine Luiza will offset losses from the drop in Magazine Luiza's long position.| HSBC Holdings vs. BTG Pactual Logstica | HSBC Holdings vs. Plano Plano Desenvolvimento | HSBC Holdings vs. Cable One | HSBC Holdings vs. ATMA Participaes 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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