Correlation Between Stellar and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Stellar 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 Stellar and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and HSBC Holdings PLC, you can compare the effects of market volatilities on Stellar 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 Stellar with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and HSBC Holdings.
Diversification Opportunities for Stellar and HSBC Holdings
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Stellar and HSBC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Stellar 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 Stellar 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 Stellar 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 Stellar i.e., Stellar and HSBC Holdings go up and down completely randomly.
Pair Corralation between Stellar and HSBC Holdings
Assuming the 90 days trading horizon Stellar is expected to generate 6.09 times more return on investment than HSBC Holdings. However, Stellar is 6.09 times more volatile than HSBC Holdings PLC. It trades about 0.1 of its potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.08 per unit of risk. If you would invest 9.03 in Stellar on October 11, 2024 and sell it today you would earn a total of 32.97 from holding Stellar or generate 365.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 59.2% |
| Values | Daily Returns |
Stellar vs. HSBC Holdings PLC
Performance |
| Timeline |
| Stellar |
| HSBC Holdings PLC |
Stellar and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stellar and HSBC Holdings
The main advantage of trading using opposite Stellar and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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 Stellar 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. Nordea Bank Abp | HSBC Holdings vs. Naked Wines plc | HSBC Holdings vs. Virgin Wines UK | HSBC Holdings vs. Sparebank 1 SR |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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