Correlation Between HSBC SP and Multi Units

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

Diversification Opportunities for HSBC SP and Multi Units

1.0

Correlation Coefficient

HSBC SP  Multi Units

No risk reduction

The 3 months correlation between HSBC and Multi is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and Multi Units Luxembourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Units Luxembourg 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 Multi Units. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Units Luxembourg has no effect on the direction of HSBC SP i.e., HSBC SP and Multi Units go up and down completely randomly.

Pair Corralation between HSBC SP and Multi Units

Assuming the 90 days trading horizon HSBC SP 500 is expected to under-perform the Multi Units. But the etf apears to be less risky and, when comparing its historical volatility, HSBC SP 500 is 1.02 times less risky than Multi Units. The etf trades about -0.03 of its potential returns per unit of risk. The Multi Units Luxembourg is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,894  in Multi Units Luxembourg on November 30, 2024 and sell it today you would lose (101.00) from holding Multi Units Luxembourg or give up 1.71% of portfolio value over 90 days.

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

HSBC SP 500  vs.  Multi Units Luxembourg

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 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.

Multi Units Luxembourg

Risk-Adjusted Performance

Very Weak

Over the last 90 days Multi Units Luxembourg has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Multi Units 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 Multi Units

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

The idea behind HSBC SP 500 and Multi Units Luxembourg 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.