Correlation Between Ethereum and HSBC Developed

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

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

Diversification Opportunities for Ethereum and HSBC Developed

0.76

Correlation Coefficient

Ethereum  HSBC Developed

Poor diversification

The 3 months correlation between Ethereum and HSBC is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and HSBC Developed World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Developed World and Ethereum 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 Ethereum are associated (or correlated) with HSBC Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Developed World has no effect on the direction of Ethereum i.e., Ethereum and HSBC Developed go up and down completely randomly.

Pair Corralation between Ethereum and HSBC Developed

Assuming the 90 days trading horizon Ethereum is expected to generate 12.31 times more return on investment than HSBC Developed. However, Ethereum is 12.31 times more volatile than HSBC Developed World. It trades about 0.14 of its potential returns per unit of risk. HSBC Developed World is currently generating about 0.18 per unit of risk. If you would invest  243,620  in Ethereum on October 24, 2024 and sell it today you would earn a total of  89,288  from holding Ethereum or generate 36.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Ethereum  vs.  HSBC Developed World

Ethereum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

HSBC Developed World

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Developed World are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HSBC Developed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ethereum and HSBC Developed

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

The idea behind Ethereum and HSBC Developed World 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.