Correlation Between HSBC Holdings and American International
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and American International 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 HSBC Holdings and American International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings plc and American International Group, you can compare the effects of market volatilities on HSBC Holdings and American International 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 HSBC Holdings with a short position of American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and American International.
Diversification Opportunities for HSBC Holdings and American International
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between HSBC and American is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International and HSBC Holdings 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 HSBC Holdings plc are associated (or correlated) with American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and American International go up and down completely randomly.
Pair Corralation between HSBC Holdings and American International
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 2.03 times more return on investment than American International. However, HSBC Holdings is 2.03 times more volatile than American International Group. It trades about 0.22 of its potential returns per unit of risk. American International Group is currently generating about 0.3 per unit of risk. If you would invest 64,300 in HSBC Holdings plc on February 14, 2024 and sell it today you would earn a total of 7,200 from holding HSBC Holdings plc or generate 11.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
HSBC Holdings plc vs. American International Group
Performance |
Timeline |
HSBC Holdings plc |
American International |
HSBC Holdings and American International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HSBC Holdings and American International
The main advantage of trading using opposite HSBC Holdings and American International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, American International 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 American International will offset losses from the drop in American International's long position.HSBC Holdings vs. Air Transport Services | HSBC Holdings vs. Cognizant Technology Solutions | HSBC Holdings vs. UnitedHealth Group Incorporated | HSBC Holdings vs. Southern Copper |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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