Correlation Between HSBC Holdings and Textron
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Textron 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 Textron 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 Textron, you can compare the effects of market volatilities on HSBC Holdings and Textron 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 Textron. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Textron.
Diversification Opportunities for HSBC Holdings and Textron
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between HSBC and Textron is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Textron go up and down completely randomly.
Pair Corralation between HSBC Holdings and Textron
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 1.47 times more return on investment than Textron. However, HSBC Holdings is 1.47 times more volatile than Textron. It trades about 0.1 of its potential returns per unit of risk. Textron is currently generating about 0.03 per unit of risk. If you would invest 76,171 in HSBC Holdings plc on November 2, 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. Textron
Performance |
| Timeline |
| HSBC Holdings plc |
| Textron |
HSBC Holdings and Textron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Textron
The main advantage of trading using opposite HSBC Holdings and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.| HSBC Holdings vs. Capital One Financial | HSBC Holdings vs. Southern Copper | HSBC Holdings vs. Prudential Financial | HSBC Holdings vs. Lloyds Banking Group |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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