Correlation Between Calculus VCT and HSBC Holdings

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

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

Diversification Opportunities for Calculus VCT and HSBC Holdings

-0.56

Correlation Coefficient

Calculus VCT  HSBC Holdings

Excellent diversification

The 3 months correlation between Calculus and HSBC is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Calculus VCT plc 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 Calculus VCT 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 Calculus VCT plc 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 Calculus VCT i.e., Calculus VCT and HSBC Holdings go up and down completely randomly.

Pair Corralation between Calculus VCT and HSBC Holdings

Assuming the 90 days trading horizon Calculus VCT plc is expected to under-perform the HSBC Holdings. In addition to that, Calculus VCT is 4.06 times more volatile than HSBC Holdings PLC. It trades about -0.22 of its total potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.35 per unit of volatility. If you would invest  72,440  in HSBC Holdings PLC on September 23, 2024 and sell it today you would earn a total of  3,640  from holding HSBC Holdings PLC or generate 5.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Calculus VCT plc  vs.  HSBC Holdings PLC

Calculus VCT plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calculus VCT plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

HSBC Holdings PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 15 (%) 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 Calculus VCT and HSBC Holdings

The main advantage of trading using opposite Calculus VCT and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calculus VCT 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 Calculus VCT plc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.