Correlation Between HSBC MSCI and HSBC NASDAQ

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

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

Diversification Opportunities for HSBC MSCI and HSBC NASDAQ

0.06

Correlation Coefficient

HSBC MSCI  HSBC NASDAQ

Significant diversification

The 3 months correlation between HSBC and HSBC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding HSBC MSCI Emerging and HSBC NASDAQ Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC NASDAQ Global 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 Emerging are associated (or correlated) with HSBC NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC NASDAQ Global has no effect on the direction of HSBC MSCI i.e., HSBC MSCI and HSBC NASDAQ go up and down completely randomly.

Pair Corralation between HSBC MSCI and HSBC NASDAQ

Assuming the 90 days trading horizon HSBC MSCI is expected to generate 44.45 times less return on investment than HSBC NASDAQ. But when comparing it to its historical volatility, HSBC MSCI Emerging is 1.16 times less risky than HSBC NASDAQ. It trades about 0.0 of its potential returns per unit of risk. HSBC NASDAQ Global is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  797.00  in HSBC NASDAQ Global on September 3, 2024 and sell it today you would earn a total of  95.00  from holding HSBC NASDAQ Global or generate 11.92% return on investment over 90 days.

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

HSBC MSCI Emerging  vs.  HSBC NASDAQ Global

HSBC MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HSBC MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HSBC MSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

HSBC NASDAQ Global

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC NASDAQ Global are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HSBC NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HSBC MSCI and HSBC NASDAQ

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

The idea behind HSBC MSCI Emerging and HSBC NASDAQ Global 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.