Correlation Between SENECA FOODS and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both SENECA FOODS 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 SENECA FOODS and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SENECA FOODS A and HSBC Holdings plc, you can compare the effects of market volatilities on SENECA FOODS 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 SENECA FOODS with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SENECA FOODS and HSBC Holdings.
Diversification Opportunities for SENECA FOODS and HSBC Holdings
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SENECA and HSBC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A 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 SENECA FOODS 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 SENECA FOODS A 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 SENECA FOODS i.e., SENECA FOODS and HSBC Holdings go up and down completely randomly.
Pair Corralation between SENECA FOODS and HSBC Holdings
Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 1.34 times more return on investment than HSBC Holdings. However, SENECA FOODS is 1.34 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 0.09 per unit of risk. If you would invest 4,500 in SENECA FOODS A on September 12, 2024 and sell it today you would earn a total of 2,200 from holding SENECA FOODS A or generate 48.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SENECA FOODS A vs. HSBC Holdings plc
Performance |
| Timeline |
| SENECA FOODS A |
| HSBC Holdings plc |
SENECA FOODS and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SENECA FOODS and HSBC Holdings
The main advantage of trading using opposite SENECA FOODS and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SENECA FOODS 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.| SENECA FOODS vs. Xenia Hotels Resorts | SENECA FOODS vs. COSTCO WHOLESALE CDR | SENECA FOODS vs. Hyatt Hotels | SENECA FOODS vs. Ross Stores |
| HSBC Holdings vs. SOUTHWEST AIRLINES | HSBC Holdings vs. Nok Airlines PCL | HSBC Holdings vs. Regions Financial | HSBC Holdings vs. ALIOR BANK |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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