Correlation Between HSBC Holdings and Bank of America Corp
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By analyzing existing cross correlation between HSBC Holdings plc and Bank of America, you can compare the effects of market volatilities on HSBC Holdings and Bank of America Corp 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 Bank of America Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Bank of America Corp.
Diversification Opportunities for HSBC Holdings and Bank of America Corp
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HSBC and Bank is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America Corp 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 Bank of America Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America Corp has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Bank of America Corp go up and down completely randomly.
Pair Corralation between HSBC Holdings and Bank of America Corp
Assuming the 90 days trading horizon HSBC Holdings is expected to generate 1.83 times less return on investment than Bank of America Corp. But when comparing it to its historical volatility, HSBC Holdings plc is 1.39 times less risky than Bank of America Corp. It trades about 0.16 of its potential returns per unit of risk. Bank of America is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,583 in Bank of America on August 28, 2024 and sell it today you would earn a total of 951.00 from holding Bank of America or generate 26.54% 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. Bank of America
Performance |
| Timeline |
| HSBC Holdings plc |
| Bank of America Corp |
HSBC Holdings and Bank of America Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Bank of America Corp
The main advantage of trading using opposite HSBC Holdings and Bank of America Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Bank of America Corp 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 Bank of America Corp will offset losses from the drop in Bank of America Corp's long position.| HSBC Holdings vs. CPU SOFTWAREHOUSE | HSBC Holdings vs. Renesas Electronics | HSBC Holdings vs. Samsung Electronics Co | HSBC Holdings vs. Electronic Arts |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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