Correlation Between Procter Gamble and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Procter Gamble and HSBC Holdings 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 Procter Gamble and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and HSBC Holdings PLC, you can compare the effects of market volatilities on Procter Gamble 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 Procter Gamble with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and HSBC Holdings.
Diversification Opportunities for Procter Gamble and HSBC Holdings
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Procter and HSBC is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble 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 Procter Gamble 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 Procter Gamble 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 Procter Gamble i.e., Procter Gamble and HSBC Holdings go up and down completely randomly.
Pair Corralation between Procter Gamble and HSBC Holdings
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 2.9 times less return on investment than HSBC Holdings. But when comparing it to its historical volatility, Procter Gamble is 1.43 times less risky than HSBC Holdings. It trades about 0.05 of its potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,650 in HSBC Holdings PLC on August 23, 2024 and sell it today you would earn a total of 1,982 from holding HSBC Holdings PLC or generate 74.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. HSBC Holdings PLC
Performance |
| Timeline |
| Procter Gamble |
| HSBC Holdings PLC |
Procter Gamble and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and HSBC Holdings
The main advantage of trading using opposite Procter Gamble and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble 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.| Procter Gamble vs. Honest Company | Procter Gamble vs. Hims Hers Health | Procter Gamble vs. Kimberly Clark | Procter Gamble vs. Colgate Palmolive |
| HSBC Holdings vs. ING Group NV | HSBC Holdings vs. Natwest Group PLC | HSBC Holdings vs. Banco Santander SA | HSBC Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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