Correlation Between HSBC DEVELOPED and HSBC EMERGING
Can any of the company-specific risk be diversified away by investing in both HSBC DEVELOPED 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 DEVELOPED 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 DEVELOPED WORLD and HSBC EMERGING MARKET, you can compare the effects of market volatilities on HSBC DEVELOPED 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 DEVELOPED with a short position of HSBC EMERGING. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC DEVELOPED and HSBC EMERGING.
Diversification Opportunities for HSBC DEVELOPED and HSBC EMERGING
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HSBC and HSBC is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding HSBC DEVELOPED WORLD 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 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 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 DEVELOPED i.e., HSBC DEVELOPED and HSBC EMERGING go up and down completely randomly.
Pair Corralation between HSBC DEVELOPED and HSBC EMERGING
Assuming the 90 days trading horizon HSBC DEVELOPED is expected to generate 1.28 times less return on investment than HSBC EMERGING. But when comparing it to its historical volatility, HSBC DEVELOPED WORLD is 1.62 times less risky than HSBC EMERGING. It trades about 0.32 of its potential returns per unit of risk. HSBC EMERGING MARKET is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,527 in HSBC EMERGING MARKET on November 27, 2024 and sell it today you would earn a total of 70.00 from holding HSBC EMERGING MARKET or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC DEVELOPED WORLD vs. HSBC EMERGING MARKET
Performance |
| Timeline |
| HSBC DEVELOPED WORLD |
| HSBC EMERGING MARKET |
HSBC DEVELOPED and HSBC EMERGING Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC DEVELOPED and HSBC EMERGING
The main advantage of trading using opposite HSBC DEVELOPED and HSBC EMERGING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC DEVELOPED 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 DEVELOPED vs. HSBC USA SUSTAINABLE | HSBC DEVELOPED vs. HSBC MSCI Europe | HSBC DEVELOPED vs. HSBC EMERGING MARKET | HSBC DEVELOPED vs. HSBC MSCI Japan |
| HSBC EMERGING vs. HSBC USA SUSTAINABLE | HSBC EMERGING vs. HSBC MSCI Europe | HSBC EMERGING vs. HSBC MSCI Japan | HSBC EMERGING vs. HSBC DEVELOPED WORLD |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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