Correlation Between HSBC MSCI and HSBC Emerging

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

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

Diversification Opportunities for HSBC MSCI and HSBC Emerging

0.92

Correlation Coefficient

HSBC MSCI  HSBC Emerging

Almost no diversification

The 3 months correlation between HSBC and HSBC is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding HSBC MSCI China and HSBC Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Emerging Market and HSBC MSCI 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 MSCI China are associated (or correlated) with HSBC Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Emerging Market has no effect on the direction of HSBC MSCI i.e., HSBC MSCI and HSBC Emerging go up and down completely randomly.

Pair Corralation between HSBC MSCI and HSBC Emerging

Assuming the 90 days trading horizon HSBC MSCI China is expected to generate 2.19 times more return on investment than HSBC Emerging. However, HSBC MSCI is 2.19 times more volatile than HSBC Emerging Market. It trades about 0.15 of its potential returns per unit of risk. HSBC Emerging Market is currently generating about 0.16 per unit of risk. If you would invest  500.00  in HSBC MSCI China on September 12, 2024 and sell it today you would earn a total of  136.00  from holding HSBC MSCI China or generate 27.2% return on investment over 90 days.

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

HSBC MSCI China  vs.  HSBC Emerging Market

HSBC MSCI China

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC MSCI China are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HSBC MSCI sustained solid returns over the last few months and may actually be approaching a breakup point.

HSBC Emerging Market

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Emerging Market are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HSBC Emerging may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HSBC MSCI and HSBC Emerging

The main advantage of trading using opposite HSBC MSCI and HSBC Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC MSCI position performs unexpectedly, HSBC Emerging 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 Emerging will offset losses from the drop in HSBC Emerging's long position.

The idea behind HSBC MSCI China and HSBC Emerging Market 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.