Correlation Between HSBC SP and HSBC MUCPAB
Can any of the company-specific risk be diversified away by investing in both HSBC SP and HSBC MUCPAB 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 HSBC MUCPAB 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 HSBC MUCPAB ETF, you can compare the effects of market volatilities on HSBC SP and HSBC MUCPAB 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 HSBC MUCPAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC SP and HSBC MUCPAB.
Diversification Opportunities for HSBC SP and HSBC MUCPAB
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between HSBC and HSBC is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and HSBC MUCPAB ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MUCPAB ETF 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 HSBC MUCPAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MUCPAB ETF has no effect on the direction of HSBC SP i.e., HSBC SP and HSBC MUCPAB go up and down completely randomly.
Pair Corralation between HSBC SP and HSBC MUCPAB
Assuming the 90 days trading horizon HSBC SP 500 is expected to generate 1.05 times more return on investment than HSBC MUCPAB. However, HSBC SP is 1.05 times more volatile than HSBC MUCPAB ETF. It trades about 0.24 of its potential returns per unit of risk. HSBC MUCPAB ETF is currently generating about 0.25 per unit of risk. If you would invest 5,445 in HSBC SP 500 on August 28, 2024 and sell it today you would earn a total of 334.00 from holding HSBC SP 500 or generate 6.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC SP 500 vs. HSBC MUCPAB ETF
Performance |
| Timeline |
| HSBC SP 500 |
| HSBC MUCPAB ETF |
HSBC SP and HSBC MUCPAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC SP and HSBC MUCPAB
The main advantage of trading using opposite HSBC SP and HSBC MUCPAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC SP position performs unexpectedly, HSBC MUCPAB 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 HSBC MUCPAB will offset losses from the drop in HSBC MUCPAB's long position.The idea behind HSBC SP 500 and HSBC MUCPAB ETF 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.| HSBC MUCPAB vs. Lyxor UCITS Japan | HSBC MUCPAB vs. Lyxor UCITS Japan | HSBC MUCPAB vs. Lyxor UCITS Stoxx | HSBC MUCPAB vs. Amundi CAC 40 |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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