Correlation Between HSBC SP and Lyxor Index

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Can any of the company-specific risk be diversified away by investing in both HSBC SP and Lyxor Index 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 Lyxor Index 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 Lyxor Index Fund, you can compare the effects of market volatilities on HSBC SP and Lyxor Index 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 Lyxor Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC SP and Lyxor Index.

Diversification Opportunities for HSBC SP and Lyxor Index

-0.74
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between HSBC and Lyxor is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and Lyxor Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Index Fund 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 Lyxor Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Index Fund has no effect on the direction of HSBC SP i.e., HSBC SP and Lyxor Index go up and down completely randomly.

Pair Corralation between HSBC SP and Lyxor Index

Assuming the 90 days trading horizon HSBC SP 500 is expected to generate 0.83 times more return on investment than Lyxor Index. However, HSBC SP 500 is 1.21 times less risky than Lyxor Index. It trades about 0.14 of its potential returns per unit of risk. Lyxor Index Fund is currently generating about 0.02 per unit of risk. If you would invest  4,064  in HSBC SP 500 on September 12, 2024 and sell it today you would earn a total of  1,765  from holding HSBC SP 500 or generate 43.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

HSBC SP 500  vs.  Lyxor Index Fund

 Performance 
       Timeline  
HSBC SP 500 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in HSBC SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, HSBC SP sustained solid returns over the last few months and may actually be approaching a breakup point.
Lyxor Index Fund 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lyxor Index Fund has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Lyxor Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HSBC SP and Lyxor Index Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HSBC SP and Lyxor Index

The main advantage of trading using opposite HSBC SP and Lyxor Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC SP position performs unexpectedly, Lyxor Index 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 Lyxor Index will offset losses from the drop in Lyxor Index's long position.
The idea behind HSBC SP 500 and Lyxor Index Fund 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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