Correlation Between HSBC MSCI and Edinburgh Worldwide

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

By analyzing existing cross correlation between HSBC MSCI USA and Edinburgh Worldwide Investment, you can compare the effects of market volatilities on HSBC MSCI and Edinburgh Worldwide 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 Edinburgh Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC MSCI and Edinburgh Worldwide.

Diversification Opportunities for HSBC MSCI and Edinburgh Worldwide

0.65

Correlation Coefficient

HSBC MSCI  Edinburgh Worldwide

Poor diversification

The 3 months correlation between HSBC and Edinburgh is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding HSBC MSCI USA and Edinburgh Worldwide Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edinburgh Worldwide 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 USA are associated (or correlated) with Edinburgh Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edinburgh Worldwide has no effect on the direction of HSBC MSCI i.e., HSBC MSCI and Edinburgh Worldwide go up and down completely randomly.

Pair Corralation between HSBC MSCI and Edinburgh Worldwide

Assuming the 90 days trading horizon HSBC MSCI USA is expected to generate 1.33 times more return on investment than Edinburgh Worldwide. However, HSBC MSCI is 1.33 times more volatile than Edinburgh Worldwide Investment. It trades about 0.04 of its potential returns per unit of risk. Edinburgh Worldwide Investment is currently generating about 0.05 per unit of risk. If you would invest  2,002  in HSBC MSCI USA on September 14, 2024 and sell it today you would earn a total of  576.00  from holding HSBC MSCI USA or generate 28.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.5%
Values	Daily Returns

HSBC MSCI USA  vs.  Edinburgh Worldwide Investment

HSBC MSCI USA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC MSCI USA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, HSBC MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Edinburgh Worldwide

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Edinburgh Worldwide Investment are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Edinburgh Worldwide exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HSBC MSCI and Edinburgh Worldwide

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

The idea behind HSBC MSCI USA and Edinburgh Worldwide Investment 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.