Correlation Between HSBC Holdings and Ross Stores
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on HSBC Holdings and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Ross Stores.
Diversification Opportunities for HSBC Holdings and Ross Stores
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HSBC and Ross is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Ross Stores go up and down completely randomly.
Pair Corralation between HSBC Holdings and Ross Stores
Assuming the 90 days trading horizon HSBC Holdings is expected to generate 1.04 times less return on investment than Ross Stores. But when comparing it to its historical volatility, HSBC Holdings plc is 2.34 times less risky than Ross Stores. It trades about 0.47 of its potential returns per unit of risk. Ross Stores is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 13,241 in Ross Stores on September 13, 2024 and sell it today you would earn a total of 1,441 from holding Ross Stores or generate 10.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. Ross Stores
Performance |
| Timeline |
| HSBC Holdings plc |
| Ross Stores |
HSBC Holdings and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Ross Stores
The main advantage of trading using opposite HSBC Holdings and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| HSBC Holdings vs. Iridium Communications | HSBC Holdings vs. Motorcar Parts of | HSBC Holdings vs. CITIC Telecom International | HSBC Holdings vs. Gamma Communications plc |
| Ross Stores vs. Apple Inc | Ross Stores vs. Apple Inc | Ross Stores vs. Apple Inc | Ross Stores vs. Apple Inc |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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