Correlation Between HSBC NASDAQ and HSBC Emerging
Can any of the company-specific risk be diversified away by investing in both HSBC NASDAQ and HSBC Emerging 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 NASDAQ and HSBC Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC NASDAQ Global and HSBC Emerging Market, you can compare the effects of market volatilities on HSBC NASDAQ and HSBC Emerging 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 NASDAQ with a short position of HSBC Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC NASDAQ and HSBC Emerging.
Diversification Opportunities for HSBC NASDAQ and HSBC Emerging
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and HSBC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding HSBC NASDAQ Global and HSBC Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Emerging Market and HSBC NASDAQ 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 NASDAQ Global are associated (or correlated) with HSBC Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Emerging Market has no effect on the direction of HSBC NASDAQ i.e., HSBC NASDAQ and HSBC Emerging go up and down completely randomly.
Pair Corralation between HSBC NASDAQ and HSBC Emerging
Assuming the 90 days trading horizon HSBC NASDAQ Global is expected to under-perform the HSBC Emerging. In addition to that, HSBC NASDAQ is 1.51 times more volatile than HSBC Emerging Market. It trades about -0.01 of its total potential returns per unit of risk. HSBC Emerging Market is currently generating about 0.04 per unit of volatility. If you would invest 1,287 in HSBC Emerging Market on August 30, 2024 and sell it today you would earn a total of 227.00 from holding HSBC Emerging Market or generate 17.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 57.83% |
| Values | Daily Returns |
HSBC NASDAQ Global vs. HSBC Emerging Market
Performance |
| Timeline |
| HSBC NASDAQ Global |
| HSBC Emerging Market |
HSBC NASDAQ and HSBC Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC NASDAQ and HSBC Emerging
The main advantage of trading using opposite HSBC NASDAQ and HSBC Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC NASDAQ position performs unexpectedly, HSBC Emerging 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 Emerging will offset losses from the drop in HSBC Emerging's long position.| HSBC NASDAQ vs. Vanguard FTSE Developed | HSBC NASDAQ vs. Leverage Shares 2x | HSBC NASDAQ vs. Amundi Index Solutions | HSBC NASDAQ vs. Amundi Index Solutions |
| HSBC Emerging vs. HSBC FTSE EPRA | HSBC Emerging vs. HSBC SP 500 | HSBC Emerging vs. HSBC MSCI Emerging | HSBC Emerging vs. HSBC NASDAQ Global |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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