Correlation Between First Majestic and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both First Majestic 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 First Majestic and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Majestic Silver and HSBC Holdings plc, you can compare the effects of market volatilities on First Majestic 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 First Majestic with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Majestic and HSBC Holdings.
Diversification Opportunities for First Majestic and HSBC Holdings
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and HSBC is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Majestic Silver 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 First Majestic 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 First Majestic Silver 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 First Majestic i.e., First Majestic and HSBC Holdings go up and down completely randomly.
Pair Corralation between First Majestic and HSBC Holdings
Assuming the 90 days horizon First Majestic is expected to generate 2.89 times less return on investment than HSBC Holdings. But when comparing it to its historical volatility, First Majestic Silver is 1.61 times less risky than HSBC Holdings. It trades about 0.05 of its potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 51,408 in HSBC Holdings plc on September 18, 2024 and sell it today you would earn a total of 42,092 from holding HSBC Holdings plc or generate 81.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Majestic Silver vs. HSBC Holdings plc
Performance |
Timeline |
First Majestic Silver |
HSBC Holdings plc |
First Majestic and HSBC Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Majestic and HSBC Holdings
The main advantage of trading using opposite First Majestic and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Majestic 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.First Majestic vs. Visa Inc | First Majestic vs. Desarrolladora Homex SAB | First Majestic vs. Tesla Inc | First Majestic vs. G Collado SAB |
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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 Stocks Directory module to find actively traded stocks across global markets.
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