Correlation Between HSBC Holdings and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Commonwealth Bank 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 Holdings and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings PLC and Commonwealth Bank of, you can compare the effects of market volatilities on HSBC Holdings and Commonwealth Bank 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 Holdings with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Commonwealth Bank.
Diversification Opportunities for HSBC Holdings and Commonwealth Bank
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between HSBC and Commonwealth is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and HSBC Holdings 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 Holdings PLC are associated (or correlated) with Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Commonwealth Bank go up and down completely randomly.
Pair Corralation between HSBC Holdings and Commonwealth Bank
Given the investment horizon of 90 days HSBC Holdings is expected to generate 1.35 times less return on investment than Commonwealth Bank. In addition to that, HSBC Holdings is 1.24 times more volatile than Commonwealth Bank of. It trades about 0.19 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.32 per unit of volatility. If you would invest 9,415 in Commonwealth Bank of on August 24, 2024 and sell it today you would earn a total of 747.00 from holding Commonwealth Bank of or generate 7.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
HSBC Holdings PLC vs. Commonwealth Bank of
Performance |
| Timeline |
| HSBC Holdings PLC |
| Commonwealth Bank |
HSBC Holdings and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Commonwealth Bank
The main advantage of trading using opposite HSBC Holdings and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Commonwealth Bank 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank's long position.| HSBC Holdings vs. ING Group NV | HSBC Holdings vs. Natwest Group PLC | HSBC Holdings vs. Banco Santander SA | HSBC Holdings vs. UBS Group AG |
| Commonwealth Bank vs. Svenska Handelsbanken PK | Commonwealth Bank vs. ANZ Group Holdings | Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. National Australia Bank |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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