Correlation Between United States and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and HSBC Holdings plc, you can compare the effects of market volatilities on United States 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 United States with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and HSBC Holdings.
Diversification Opportunities for United States and HSBC Holdings
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and HSBC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and HSBC Holdings go up and down completely randomly.
Pair Corralation between United States and HSBC Holdings
Given the investment horizon of 90 days United States Steel is expected to generate 15.35 times more return on investment than HSBC Holdings. However, United States is 15.35 times more volatile than HSBC Holdings plc. It trades about 0.08 of its potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.22 per unit of risk. If you would invest 78,605 in United States Steel on September 2, 2024 and sell it today you would earn a total of 3,805 from holding United States Steel or generate 4.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. HSBC Holdings plc
Performance |
| Timeline |
| United States Steel |
| HSBC Holdings plc |
United States and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and HSBC Holdings
The main advantage of trading using opposite United States and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.The idea behind United States Steel and HSBC Holdings plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| HSBC Holdings vs. First Majestic Silver | HSBC Holdings vs. United States Steel | HSBC Holdings vs. Cognizant Technology Solutions | HSBC Holdings vs. Taiwan Semiconductor Manufacturing |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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