Correlation Between HSBC Holdings and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Rio Tinto 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 Rio Tinto 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 Rio Tinto Group, you can compare the effects of market volatilities on HSBC Holdings and Rio Tinto 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 Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Rio Tinto.
Diversification Opportunities for HSBC Holdings and Rio Tinto
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HSBC and Rio is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group 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 Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto Group has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Rio Tinto go up and down completely randomly.
Pair Corralation between HSBC Holdings and Rio Tinto
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.75 times more return on investment than Rio Tinto. However, HSBC Holdings plc is 1.33 times less risky than Rio Tinto. It trades about 0.26 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.13 per unit of risk. If you would invest 4,700 in HSBC Holdings plc on November 5, 2024 and sell it today you would earn a total of 300.00 from holding HSBC Holdings plc or generate 6.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. Rio Tinto Group
Performance |
| Timeline |
| HSBC Holdings plc |
| Rio Tinto Group |
HSBC Holdings and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Rio Tinto
The main advantage of trading using opposite HSBC Holdings and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Rio Tinto 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 Rio Tinto will offset losses from the drop in Rio Tinto's long position.| HSBC Holdings vs. OAKTRSPECLENDNEW | HSBC Holdings vs. PEPTONIC MEDICAL | HSBC Holdings vs. Medical Properties Trust | HSBC Holdings vs. Direct Line Insurance |
| Rio Tinto vs. ECHO INVESTMENT ZY | Rio Tinto vs. Flutter Entertainment PLC | Rio Tinto vs. Melco Resorts Entertainment | Rio Tinto vs. Tencent Music Entertainment |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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