Correlation Between HSBC SP and UST Inc

Can any of the company-specific risk be diversified away by investing in both HSBC SP and UST Inc 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 UST Inc 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 UST Inc 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 UST Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC SP and UST Inc.

Diversification Opportunities for HSBC SP and UST Inc

0.99

Correlation Coefficient

HSBC SP  UST Inc

No risk reduction

The 3 months correlation between HSBC and UST is 0.99. 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 UST Inc. 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 UST Inc go up and down completely randomly.

Pair Corralation between HSBC SP and UST Inc

Assuming the 90 days trading horizon HSBC SP 500 is expected to generate 0.78 times more return on investment than UST Inc. However, HSBC SP 500 is 1.28 times less risky than UST Inc. It trades about -0.1 of its potential returns per unit of risk. Multi Units Luxembourg is currently generating about -0.11 per unit of risk. If you would invest  5,733  in HSBC SP 500 on December 28, 2024 and sell it today you would lose (392.00) from holding HSBC SP 500 or give up 6.84% 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 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.

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 latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with HSBC SP and UST Inc

The main advantage of trading using opposite HSBC SP and UST Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC SP position performs unexpectedly, UST Inc 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 UST Inc will offset losses from the drop in UST Inc's 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.