Correlation Between HSBC Holdings and UMC Electronics
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and UMC Electronics 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 UMC Electronics 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 UMC Electronics Co, you can compare the effects of market volatilities on HSBC Holdings and UMC Electronics 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 UMC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and UMC Electronics.
Diversification Opportunities for HSBC Holdings and UMC Electronics
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between HSBC and UMC is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics 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 UMC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMC Electronics has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and UMC Electronics go up and down completely randomly.
Pair Corralation between HSBC Holdings and UMC Electronics
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.63 times more return on investment than UMC Electronics. However, HSBC Holdings plc is 1.59 times less risky than UMC Electronics. It trades about 0.08 of its potential returns per unit of risk. UMC Electronics Co is currently generating about -0.03 per unit of risk. If you would invest 489.00 in HSBC Holdings plc on September 3, 2024 and sell it today you would earn a total of 402.00 from holding HSBC Holdings plc or generate 82.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. UMC Electronics Co
Performance |
| Timeline |
| HSBC Holdings plc |
| UMC Electronics |
HSBC Holdings and UMC Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and UMC Electronics
The main advantage of trading using opposite HSBC Holdings and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, UMC Electronics 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 UMC Electronics will offset losses from the drop in UMC Electronics' long position.| HSBC Holdings vs. INTERSHOP Communications Aktiengesellschaft | HSBC Holdings vs. Zijin Mining Group | HSBC Holdings vs. GRIFFIN MINING LTD | HSBC Holdings vs. Computer And Technologies |
| UMC Electronics vs. ASURE SOFTWARE | UMC Electronics vs. Axway Software SA | UMC Electronics vs. Micron Technology | UMC Electronics vs. AXWAY SOFTWARE EO |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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