Correlation Between HSBC SP and SSgA SPDR
Can any of the company-specific risk be diversified away by investing in both HSBC SP and SSgA SPDR 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 SSgA SPDR 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 SSgA SPDR ETFs, you can compare the effects of market volatilities on HSBC SP and SSgA SPDR 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 SSgA SPDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC SP and SSgA SPDR.
Diversification Opportunities for HSBC SP and SSgA SPDR
Excellent diversification
The 3 months correlation between HSBC and SSgA is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of HSBC SP i.e., HSBC SP and SSgA SPDR go up and down completely randomly.
Pair Corralation between HSBC SP and SSgA SPDR
Assuming the 90 days trading horizon HSBC SP 500 is expected to generate 1.11 times more return on investment than SSgA SPDR. However, HSBC SP is 1.11 times more volatile than SSgA SPDR ETFs. It trades about 0.3 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about -0.14 per unit of risk. If you would invest 5,203 in HSBC SP 500 on August 28, 2024 and sell it today you would earn a total of 598.00 from holding HSBC SP 500 or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC SP 500 vs. SSgA SPDR ETFs
Performance |
| Timeline |
| HSBC SP 500 |
| SSgA SPDR ETFs |
HSBC SP and SSgA SPDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC SP and SSgA SPDR
The main advantage of trading using opposite HSBC SP and SSgA SPDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC SP position performs unexpectedly, SSgA SPDR 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 SSgA SPDR will offset losses from the drop in SSgA SPDR's long position.The idea behind HSBC SP 500 and SSgA SPDR ETFs pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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