Correlation Between HSBC Holdings and Vanguard World
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Vanguard World 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 Vanguard World 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 Vanguard World, you can compare the effects of market volatilities on HSBC Holdings and Vanguard World 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 Vanguard World. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Vanguard World.
Diversification Opportunities for HSBC Holdings and Vanguard World
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between HSBC and Vanguard is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World 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 Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Vanguard World go up and down completely randomly.
Pair Corralation between HSBC Holdings and Vanguard World
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 1.77 times more return on investment than Vanguard World. However, HSBC Holdings is 1.77 times more volatile than Vanguard World. It trades about 0.07 of its potential returns per unit of risk. Vanguard World is currently generating about 0.03 per unit of risk. If you would invest 57,167 in HSBC Holdings plc on September 4, 2024 and sell it today you would earn a total of 36,333 from holding HSBC Holdings plc or generate 63.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
HSBC Holdings plc vs. Vanguard World
Performance |
| Timeline |
| HSBC Holdings plc |
| Vanguard World |
HSBC Holdings and Vanguard World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Vanguard World
The main advantage of trading using opposite HSBC Holdings and Vanguard World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Vanguard World 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 Vanguard World will offset losses from the drop in Vanguard World's long position.| HSBC Holdings vs. United States Steel | HSBC Holdings vs. FIBRA Storage | HSBC Holdings vs. Micron Technology | HSBC Holdings vs. Delta Air Lines |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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