Correlation Between Vanguard FTSE and HSBC SP
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and HSBC SP 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 Vanguard FTSE and HSBC SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and HSBC SP 500, you can compare the effects of market volatilities on Vanguard FTSE and HSBC SP 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 Vanguard FTSE with a short position of HSBC SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and HSBC SP.
Diversification Opportunities for Vanguard FTSE and HSBC SP
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and HSBC is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and HSBC SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC SP 500 and Vanguard FTSE 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 Vanguard FTSE Developed are associated (or correlated) with HSBC SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC SP 500 has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and HSBC SP go up and down completely randomly.
Pair Corralation between Vanguard FTSE and HSBC SP
Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to generate 1.02 times more return on investment than HSBC SP. However, Vanguard FTSE is 1.02 times more volatile than HSBC SP 500. It trades about 0.25 of its potential returns per unit of risk. HSBC SP 500 is currently generating about -0.13 per unit of risk. If you would invest 4,933 in Vanguard FTSE Developed on November 28, 2024 and sell it today you would earn a total of 226.00 from holding Vanguard FTSE Developed or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. HSBC SP 500
Performance |
| Timeline |
| Vanguard FTSE Developed |
| HSBC SP 500 |
Vanguard FTSE and HSBC SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and HSBC SP
The main advantage of trading using opposite Vanguard FTSE and HSBC SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, HSBC SP 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 SP will offset losses from the drop in HSBC SP's long position.| Vanguard FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard Global Aggregate | Vanguard FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard FTSE All World |
| HSBC SP vs. Vanguard FTSE Developed | HSBC SP vs. Leverage Shares 2x | HSBC SP vs. Amundi Index Solutions | HSBC SP vs. Amundi Index Solutions |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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