Correlation Between Select Sector and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Select Sector 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 Select Sector and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Select Sector and HSBC Holdings plc, you can compare the effects of market volatilities on Select Sector 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 Select Sector with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Sector and HSBC Holdings.
Diversification Opportunities for Select Sector and HSBC Holdings
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Select and HSBC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector 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 Select Sector 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 The Select Sector 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 Select Sector i.e., Select Sector and HSBC Holdings go up and down completely randomly.
Pair Corralation between Select Sector and HSBC Holdings
Assuming the 90 days trading horizon Select Sector is expected to generate 1.84 times less return on investment than HSBC Holdings. In addition to that, Select Sector is 1.12 times more volatile than HSBC Holdings plc. It trades about 0.03 of its total potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.07 per unit of volatility. If you would invest 57,167 in HSBC Holdings plc on September 4, 2024 and sell it today you would earn a total of 36,333 from holding HSBC Holdings plc or generate 63.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
The Select Sector vs. HSBC Holdings plc
Performance |
| Timeline |
| Select Sector |
| HSBC Holdings plc |
Select Sector and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Sector and HSBC Holdings
The main advantage of trading using opposite Select Sector and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector 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.| Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard STAR Funds | Select Sector vs. SPDR SP 500 |
| HSBC Holdings vs. United States Steel | HSBC Holdings vs. FIBRA Storage | HSBC Holdings vs. Micron Technology | HSBC Holdings vs. Delta Air Lines |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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