Correlation Between HSBC Holdings and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Westpac Banking 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 Westpac Banking 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 Westpac Banking, you can compare the effects of market volatilities on HSBC Holdings and Westpac Banking 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 Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Westpac Banking.
Diversification Opportunities for HSBC Holdings and Westpac Banking
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and Westpac is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking 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 Westpac Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westpac Banking has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Westpac Banking go up and down completely randomly.
Pair Corralation between HSBC Holdings and Westpac Banking
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.98 times more return on investment than Westpac Banking. However, HSBC Holdings plc is 1.02 times less risky than Westpac Banking. It trades about 0.08 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.07 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. Westpac Banking
Performance |
| Timeline |
| HSBC Holdings plc |
| Westpac Banking |
HSBC Holdings and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Westpac Banking
The main advantage of trading using opposite HSBC Holdings and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Westpac Banking 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 Westpac Banking will offset losses from the drop in Westpac Banking's 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 |
| Westpac Banking vs. Ultra Clean Holdings | Westpac Banking vs. TYSON FOODS A | Westpac Banking vs. CVW CLEANTECH INC | Westpac Banking vs. IMAGIN MEDICAL 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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