Correlation Between HSBC Holdings and IShares Trust
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and IShares Trust 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 IShares Trust 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 iShares Trust , you can compare the effects of market volatilities on HSBC Holdings and IShares Trust 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and IShares Trust.
Diversification Opportunities for HSBC Holdings and IShares Trust
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between HSBC and IShares is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and IShares Trust go up and down completely randomly.
Pair Corralation between HSBC Holdings and IShares Trust
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 2.54 times more return on investment than IShares Trust. However, HSBC Holdings is 2.54 times more volatile than iShares Trust . It trades about 0.13 of its potential returns per unit of risk. iShares Trust is currently generating about 0.03 per unit of risk. If you would invest 76,171 in HSBC Holdings plc on September 12, 2024 and sell it today you would earn a total of 17,329 from holding HSBC Holdings plc or generate 22.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. iShares Trust
Performance |
| Timeline |
| HSBC Holdings plc |
| iShares Trust |
HSBC Holdings and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and IShares Trust
The main advantage of trading using opposite HSBC Holdings and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, IShares Trust 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 IShares Trust will offset losses from the drop in IShares Trust's long position.| HSBC Holdings vs. Lloyds Banking Group | HSBC Holdings vs. First Republic Bank | HSBC Holdings vs. Southern Copper | HSBC Holdings vs. Ameriprise Financial |
| IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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