Correlation Between HSBC Holdings and Motorcar Parts
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Motorcar Parts 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 Motorcar Parts 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 Motorcar Parts of, you can compare the effects of market volatilities on HSBC Holdings and Motorcar Parts 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 Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Motorcar Parts.
Diversification Opportunities for HSBC Holdings and Motorcar Parts
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and Motorcar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts 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 Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Motorcar Parts go up and down completely randomly.
Pair Corralation between HSBC Holdings and Motorcar Parts
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.39 times more return on investment than Motorcar Parts. However, HSBC Holdings plc is 2.53 times less risky than Motorcar Parts. It trades about 0.08 of its potential returns per unit of risk. Motorcar Parts of is currently generating about 0.01 per unit of risk. If you would invest 2,382 in HSBC Holdings plc on September 14, 2024 and sell it today you would earn a total of 2,158 from holding HSBC Holdings plc or generate 90.6% 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. Motorcar Parts of
Performance |
| Timeline |
| HSBC Holdings plc |
| Motorcar Parts |
HSBC Holdings and Motorcar Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Motorcar Parts
The main advantage of trading using opposite HSBC Holdings and Motorcar Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Motorcar Parts 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 Motorcar Parts will offset losses from the drop in Motorcar Parts' long position.| HSBC Holdings vs. Motorcar Parts of | HSBC Holdings vs. NH HOTEL GROUP | HSBC Holdings vs. InterContinental Hotels Group | HSBC Holdings vs. MELIA HOTELS |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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