Correlation Between HSBC Holdings and Atmos Energy

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

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

Diversification Opportunities for HSBC Holdings and Atmos Energy

-0.43

Correlation Coefficient

HSBC Holdings  Atmos Energy

Very good diversification

The 3 months correlation between HSBC and Atmos is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy and HSBC Holdings 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 Holdings plc are associated (or correlated) with Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Atmos Energy go up and down completely randomly.

Pair Corralation between HSBC Holdings and Atmos Energy

Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 6.34 times more return on investment than Atmos Energy. However, HSBC Holdings is 6.34 times more volatile than Atmos Energy. It trades about 0.11 of its potential returns per unit of risk. Atmos Energy is currently generating about -0.05 per unit of risk. If you would invest  7,432  in HSBC Holdings plc on December 28, 2024 and sell it today you would earn a total of  904.00  from holding HSBC Holdings plc or generate 12.16% return on investment over 90 days.

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

HSBC Holdings plc  vs.  Atmos Energy

HSBC Holdings plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HSBC Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Atmos Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atmos Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Atmos Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HSBC Holdings and Atmos Energy

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

The idea behind HSBC Holdings plc and Atmos Energy 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.