Correlation Between HSBC DEVELOPED and HSBC MSCI

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Can any of the company-specific risk be diversified away by investing in both HSBC DEVELOPED and HSBC MSCI 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 DEVELOPED and HSBC MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC DEVELOPED WORLD and HSBC MSCI Japan, you can compare the effects of market volatilities on HSBC DEVELOPED and HSBC MSCI 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 DEVELOPED with a short position of HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC DEVELOPED and HSBC MSCI.

Diversification Opportunities for HSBC DEVELOPED and HSBC MSCI

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between HSBC and HSBC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding HSBC DEVELOPED WORLD and HSBC MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI Japan and HSBC DEVELOPED 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 DEVELOPED WORLD are associated (or correlated) with HSBC MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI Japan has no effect on the direction of HSBC DEVELOPED i.e., HSBC DEVELOPED and HSBC MSCI go up and down completely randomly.

Pair Corralation between HSBC DEVELOPED and HSBC MSCI

Assuming the 90 days trading horizon HSBC DEVELOPED WORLD is expected to generate 0.62 times more return on investment than HSBC MSCI. However, HSBC DEVELOPED WORLD is 1.61 times less risky than HSBC MSCI. It trades about 0.13 of its potential returns per unit of risk. HSBC MSCI Japan is currently generating about 0.02 per unit of risk. If you would invest  2,030  in HSBC DEVELOPED WORLD on September 3, 2024 and sell it today you would earn a total of  442.00  from holding HSBC DEVELOPED WORLD or generate 21.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

HSBC DEVELOPED WORLD  vs.  HSBC MSCI Japan

 Performance 
       Timeline  
HSBC DEVELOPED WORLD 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in HSBC DEVELOPED WORLD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, HSBC DEVELOPED is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
HSBC MSCI Japan 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HSBC MSCI Japan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, HSBC MSCI is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

HSBC DEVELOPED and HSBC MSCI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HSBC DEVELOPED and HSBC MSCI

The main advantage of trading using opposite HSBC DEVELOPED and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC DEVELOPED position performs unexpectedly, HSBC MSCI 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 MSCI will offset losses from the drop in HSBC MSCI's long position.
The idea behind HSBC DEVELOPED WORLD and HSBC MSCI Japan 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.
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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