Correlation Between HSBC Holdings and China Construction
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and China Construction 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 China Construction 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 China Construction Bank, you can compare the effects of market volatilities on HSBC Holdings and China Construction 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 China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and China Construction.
Diversification Opportunities for HSBC Holdings and China Construction
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and China is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and China Construction Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Construction Bank 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 China Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Construction Bank has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and China Construction go up and down completely randomly.
Pair Corralation between HSBC Holdings and China Construction
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.5 times more return on investment than China Construction. However, HSBC Holdings plc is 2.01 times less risky than China Construction. It trades about 0.18 of its potential returns per unit of risk. China Construction Bank is currently generating about -0.01 per unit of risk. If you would invest 4,192 in HSBC Holdings plc on September 1, 2024 and sell it today you would earn a total of 208.00 from holding HSBC Holdings plc or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
HSBC Holdings plc vs. China Construction Bank
Performance |
| Timeline |
| HSBC Holdings plc |
| China Construction Bank |
HSBC Holdings and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and China Construction
The main advantage of trading using opposite HSBC Holdings and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, China Construction 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 China Construction will offset losses from the drop in China Construction's long position.| HSBC Holdings vs. Warner Music Group | HSBC Holdings vs. Renesas Electronics | HSBC Holdings vs. Benchmark Electronics | HSBC Holdings vs. Xenia Hotels Resorts |
| China Construction vs. OURGAME INTHOLDL 00005 | China Construction vs. Penn National Gaming | China Construction vs. Marie Brizard Wine | China Construction vs. Media and Games |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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