Correlation Between Western Midstream and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Western Midstream 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 Western Midstream and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Midstream Partners and HSBC Holdings PLC, you can compare the effects of market volatilities on Western Midstream 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 Western Midstream with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Midstream and HSBC Holdings.
Diversification Opportunities for Western Midstream and HSBC Holdings
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and HSBC is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners 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 Western Midstream 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 Western Midstream Partners 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 Western Midstream i.e., Western Midstream and HSBC Holdings go up and down completely randomly.
Pair Corralation between Western Midstream and HSBC Holdings
Considering the 90-day investment horizon Western Midstream Partners is expected to generate 1.16 times more return on investment than HSBC Holdings. However, Western Midstream is 1.16 times more volatile than HSBC Holdings PLC. It trades about 0.09 of its potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.05 per unit of risk. If you would invest 3,407 in Western Midstream Partners on September 3, 2024 and sell it today you would earn a total of 664.00 from holding Western Midstream Partners or generate 19.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Midstream Partners vs. HSBC Holdings PLC
Performance |
| Timeline |
| Western Midstream |
| HSBC Holdings PLC |
Western Midstream and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Midstream and HSBC Holdings
The main advantage of trading using opposite Western Midstream and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Midstream 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.| Western Midstream vs. MPLX LP | Western Midstream vs. Plains All American | Western Midstream vs. SPACE | Western Midstream vs. T Rowe Price |
| HSBC Holdings vs. Partner Communications | HSBC Holdings vs. Merck Company | HSBC Holdings vs. Western Midstream Partners | HSBC Holdings vs. Edgewise Therapeutics |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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