Correlation Between HSBC SP and Lyxor Commodities

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

By analyzing existing cross correlation between HSBC SP 500 and Lyxor Commodities RefinitivCoreCommodity, you can compare the effects of market volatilities on HSBC SP and Lyxor Commodities 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 SP with a short position of Lyxor Commodities. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC SP and Lyxor Commodities.

Diversification Opportunities for HSBC SP and Lyxor Commodities

0.4

Correlation Coefficient

HSBC SP  Lyxor Commodities

Very weak diversification

The 3 months correlation between HSBC and Lyxor is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and Lyxor Commodities RefinitivCor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Commodities and HSBC SP 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 SP 500 are associated (or correlated) with Lyxor Commodities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Commodities has no effect on the direction of HSBC SP i.e., HSBC SP and Lyxor Commodities go up and down completely randomly.

Pair Corralation between HSBC SP and Lyxor Commodities

Assuming the 90 days trading horizon HSBC SP 500 is expected to under-perform the Lyxor Commodities. In addition to that, HSBC SP is 1.05 times more volatile than Lyxor Commodities RefinitivCoreCommodity. It trades about -0.13 of its total potential returns per unit of risk. Lyxor Commodities RefinitivCoreCommodity is currently generating about 0.05 per unit of volatility. If you would invest  2,386  in Lyxor Commodities RefinitivCoreCommodity on December 29, 2024 and sell it today you would earn a total of  70.00  from holding Lyxor Commodities RefinitivCoreCommodity or generate 2.93% return on investment over 90 days.

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

HSBC SP 500  vs.  Lyxor Commodities RefinitivCor

HSBC SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days HSBC SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Lyxor Commodities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Commodities RefinitivCoreCommodity are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Lyxor Commodities 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 SP and Lyxor Commodities

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

The idea behind HSBC SP 500 and Lyxor Commodities RefinitivCoreCommodity 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.