Correlation Between Bank of America and HSBC Holdings
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By analyzing existing cross correlation between Bank of America and HSBC Holdings plc, you can compare the effects of market volatilities on Bank of America and HSBC Holdings 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 Bank of America with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and HSBC Holdings.
Diversification Opportunities for Bank of America and HSBC Holdings
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and HSBC is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and HSBC Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings plc and Bank of America 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 Bank of America are associated (or correlated) with HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings plc has no effect on the direction of Bank of America i.e., Bank of America and HSBC Holdings go up and down completely randomly.
Pair Corralation between Bank of America and HSBC Holdings
Assuming the 90 days trading horizon Bank of America is expected to generate 2.05 times more return on investment than HSBC Holdings. However, Bank of America is 2.05 times more volatile than HSBC Holdings plc. It trades about 0.32 of its potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.23 per unit of risk. If you would invest 3,877 in Bank of America on September 1, 2024 and sell it today you would earn a total of 657.00 from holding Bank of America or generate 16.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. HSBC Holdings plc
Performance |
| Timeline |
| Bank of America |
| HSBC Holdings plc |
Bank of America and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and HSBC Holdings
The main advantage of trading using opposite Bank of America and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, HSBC Holdings 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 Holdings will offset losses from the drop in HSBC Holdings' long position.| Bank of America vs. PRECISION DRILLING P | Bank of America vs. Insurance Australia Group | Bank of America vs. United Insurance Holdings | Bank of America vs. SBI Insurance Group |
| HSBC Holdings vs. JPMorgan Chase Co | HSBC Holdings vs. Bank of America | HSBC Holdings vs. Citigroup | HSBC Holdings vs. Mitsubishi UFJ Financial |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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