Correlation Between HSBC SP and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both HSBC SP and Invesco FTSE 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 Invesco FTSE 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 Invesco FTSE RAFI, you can compare the effects of market volatilities on HSBC SP and Invesco FTSE 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 Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC SP and Invesco FTSE.
Diversification Opportunities for HSBC SP and Invesco FTSE
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between HSBC and Invesco is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of HSBC SP i.e., HSBC SP and Invesco FTSE go up and down completely randomly.
Pair Corralation between HSBC SP and Invesco FTSE
Assuming the 90 days trading horizon HSBC SP 500 is expected to generate 0.61 times more return on investment than Invesco FTSE. However, HSBC SP 500 is 1.64 times less risky than Invesco FTSE. It trades about 0.11 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.06 per unit of risk. If you would invest 3,697 in HSBC SP 500 on August 29, 2024 and sell it today you would earn a total of 2,046 from holding HSBC SP 500 or generate 55.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 85.35% |
| Values | Daily Returns |
HSBC SP 500 vs. Invesco FTSE RAFI
Performance |
| Timeline |
| HSBC SP 500 |
| Invesco FTSE RAFI |
HSBC SP and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC SP and Invesco FTSE
The main advantage of trading using opposite HSBC SP and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC SP position performs unexpectedly, Invesco FTSE 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 Invesco FTSE will offset losses from the drop in Invesco FTSE's long position.| HSBC SP vs. Amundi Index Solutions | HSBC SP vs. Manitou BF SA | HSBC SP vs. Ossiam Minimum Variance | HSBC SP vs. Ekinops SA |
| Invesco FTSE vs. Amundi Index Solutions | Invesco FTSE vs. Manitou BF SA | Invesco FTSE vs. Ossiam Minimum Variance | Invesco FTSE vs. Ekinops SA |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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