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 Emerging 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

0.79

Correlation Coefficient

HSBC MSCI  HSBC Emerging

Poor diversification

The 3 months correlation between HSBC and HSBC is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding HSBC MSCI Emerging 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 Emerging 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 is expected to generate 16.22 times less return on investment than HSBC Emerging. But when comparing it to its historical volatility, HSBC MSCI Emerging is 1.39 times less risky than HSBC Emerging. It trades about 0.0 of its potential returns per unit of risk. HSBC Emerging Market is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,467  in HSBC Emerging Market on September 3, 2024 and sell it today you would earn a total of  57.00  from holding HSBC Emerging Market or generate 3.89% return on investment over 90 days.

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

HSBC MSCI Emerging  vs.  HSBC Emerging Market

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 Emerging Market

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Emerging Market are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HSBC Emerging is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Emerging 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.