Correlation Between HSBC SP and HSBC MSCI

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Can any of the company-specific risk be diversified away by investing in both HSBC SP and HSBC MSCI 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 HSBC MSCI 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 HSBC MSCI USA, you can compare the effects of market volatilities on HSBC SP and HSBC MSCI 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 HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC SP and HSBC MSCI.

Diversification Opportunities for HSBC SP and HSBC MSCI

HSBCHSBCDiversified AwayHSBCHSBCDiversified Away100%
0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between HSBC and HSBC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and HSBC MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI USA 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 HSBC MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI USA has no effect on the direction of HSBC SP i.e., HSBC SP and HSBC MSCI go up and down completely randomly.

Pair Corralation between HSBC SP and HSBC MSCI

Assuming the 90 days trading horizon HSBC SP 500 is expected to generate 0.87 times more return on investment than HSBC MSCI. However, HSBC SP 500 is 1.15 times less risky than HSBC MSCI. It trades about 0.05 of its potential returns per unit of risk. HSBC MSCI USA is currently generating about 0.03 per unit of risk. If you would invest  5,749  in HSBC SP 500 on November 24, 2024 and sell it today you would earn a total of  124.00  from holding HSBC SP 500 or generate 2.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

HSBC SP 500  vs.  HSBC MSCI USA

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -2-1012345
JavaScript chart by amCharts 3.21.15HHH HPAU
       Timeline  
HSBC SP 500 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in HSBC SP 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, HSBC SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb56.55757.55858.55959.5
HSBC MSCI USA 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in HSBC MSCI USA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HSBC MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb40.640.84141.241.441.641.842

HSBC SP and HSBC MSCI Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.19-1.62-1.05-0.480.06790.631.21.772.34 0.20.40.60.8
JavaScript chart by amCharts 3.21.15HHH HPAU
       Returns  

Pair Trading with HSBC SP and HSBC MSCI

The main advantage of trading using opposite HSBC SP and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC SP position performs unexpectedly, HSBC MSCI 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 MSCI will offset losses from the drop in HSBC MSCI's long position.
The idea behind HSBC SP 500 and HSBC MSCI USA 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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