Correlation Between HSBC SP and SPDR Barclays
Can any of the company-specific risk be diversified away by investing in both HSBC SP and SPDR Barclays 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 SP and SPDR Barclays into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC SP 500 and SPDR Barclays Euro, you can compare the effects of market volatilities on HSBC SP and SPDR Barclays 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 SP with a short position of SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC SP and SPDR Barclays.
Diversification Opportunities for HSBC SP and SPDR Barclays
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and SPDR is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and SPDR Barclays Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Euro and HSBC SP 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 SP 500 are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Euro has no effect on the direction of HSBC SP i.e., HSBC SP and SPDR Barclays go up and down completely randomly.
Pair Corralation between HSBC SP and SPDR Barclays
Assuming the 90 days trading horizon HSBC SP 500 is expected to generate 6.32 times more return on investment than SPDR Barclays. However, HSBC SP is 6.32 times more volatile than SPDR Barclays Euro. It trades about 0.21 of its potential returns per unit of risk. SPDR Barclays Euro is currently generating about 0.06 per unit of risk. If you would invest 5,440 in HSBC SP 500 on August 24, 2024 and sell it today you would earn a total of 288.00 from holding HSBC SP 500 or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC SP 500 vs. SPDR Barclays Euro
Performance |
| Timeline |
| HSBC SP 500 |
| SPDR Barclays Euro |
HSBC SP and SPDR Barclays Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC SP and SPDR Barclays
The main advantage of trading using opposite HSBC SP and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC SP position performs unexpectedly, SPDR Barclays 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 SPDR Barclays will offset losses from the drop in SPDR Barclays' long position.| HSBC SP vs. HSBC Multi Factor | HSBC SP vs. HSBC MSCI China | HSBC SP vs. HSBC Emerging Market | HSBC SP vs. HSBC USA Sustainable |
| SPDR Barclays vs. Amundi ETF Govies | SPDR Barclays vs. iShares STOXX Europe | SPDR Barclays vs. iShares Global Infrastructure | SPDR Barclays vs. SPDR MSCI World |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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