Correlation Between GoldMining and HSBC Holdings

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

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

Diversification Opportunities for GoldMining and HSBC Holdings

-0.78

Correlation Coefficient

GoldMining  HSBC Holdings

Pay attention - limited upside

The 3 months correlation between GoldMining and HSBC is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining 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 GoldMining 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 GoldMining 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 GoldMining i.e., GoldMining and HSBC Holdings go up and down completely randomly.

Pair Corralation between GoldMining and HSBC Holdings

Assuming the 90 days trading horizon GoldMining is expected to generate 1.15 times less return on investment than HSBC Holdings. In addition to that, GoldMining is 3.33 times more volatile than HSBC Holdings PLC. It trades about 0.12 of its total potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.46 per unit of volatility. If you would invest  77,200  in HSBC Holdings PLC on October 25, 2024 and sell it today you would earn a total of  5,100  from holding HSBC Holdings PLC or generate 6.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	52.63%
Values	Daily Returns

GoldMining  vs.  HSBC Holdings PLC

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

HSBC Holdings PLC

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, HSBC Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GoldMining and HSBC Holdings

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

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.