Correlation Between HSBC Holdings and Natwest Group
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Natwest Group 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 Natwest Group 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 Natwest Group PLC, you can compare the effects of market volatilities on HSBC Holdings and Natwest Group 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 Natwest Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Natwest Group.
Diversification Opportunities for HSBC Holdings and Natwest Group
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HSBC and Natwest is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Natwest Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natwest Group PLC 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 Natwest Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natwest Group PLC has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Natwest Group go up and down completely randomly.
Pair Corralation between HSBC Holdings and Natwest Group
Given the investment horizon of 90 days HSBC Holdings is expected to generate 1.16 times less return on investment than Natwest Group. But when comparing it to its historical volatility, HSBC Holdings PLC is 1.42 times less risky than Natwest Group. It trades about 0.08 of its potential returns per unit of risk. Natwest Group PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 927.00 in Natwest Group PLC on August 26, 2024 and sell it today you would earn a total of 63.00 from holding Natwest Group PLC or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings PLC vs. Natwest Group PLC
Performance |
| Timeline |
| HSBC Holdings PLC |
| Natwest Group PLC |
HSBC Holdings and Natwest Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Natwest Group
The main advantage of trading using opposite HSBC Holdings and Natwest Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Natwest Group 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 Natwest Group will offset losses from the drop in Natwest Group'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 |
| Natwest Group vs. ING Group NV | Natwest Group vs. HSBC Holdings PLC | Natwest Group vs. Banco Santander SA | Natwest Group vs. UBS Group AG |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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