Correlation Between Gaztransport and HSBC Holdings

Can any of the company-specific risk be diversified away by investing in both Gaztransport 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 Gaztransport and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gaztransport et Technigaz and HSBC Holdings PLC, you can compare the effects of market volatilities on Gaztransport 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 Gaztransport with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaztransport and HSBC Holdings.

Diversification Opportunities for Gaztransport and HSBC Holdings

0.45

Correlation Coefficient

Gaztransport  HSBC Holdings

Very weak diversification

The 3 months correlation between Gaztransport and HSBC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport et Technigaz 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 Gaztransport 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 Gaztransport et Technigaz 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 Gaztransport i.e., Gaztransport and HSBC Holdings go up and down completely randomly.

Pair Corralation between Gaztransport and HSBC Holdings

Assuming the 90 days trading horizon Gaztransport et Technigaz is expected to generate 2.62 times more return on investment than HSBC Holdings. However, Gaztransport is 2.62 times more volatile than HSBC Holdings PLC. It trades about 0.2 of its potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.28 per unit of risk. If you would invest  12,993  in Gaztransport et Technigaz on October 9, 2024 and sell it today you would earn a total of  822.00  from holding Gaztransport et Technigaz or generate 6.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Gaztransport et Technigaz  vs.  HSBC Holdings PLC

Gaztransport et Technigaz

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport et Technigaz are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gaztransport may actually be approaching a critical reversion point that can send shares even higher in February 2025.

HSBC Holdings PLC

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HSBC Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gaztransport and HSBC Holdings

The main advantage of trading using opposite Gaztransport and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaztransport 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 Gaztransport et Technigaz 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.