Correlation Between HSBC Holdings and CarMax
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and CarMax 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 Holdings and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings PLC and CarMax Inc, you can compare the effects of market volatilities on HSBC Holdings and CarMax 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 Holdings with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and CarMax.
Diversification Opportunities for HSBC Holdings and CarMax
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HSBC and CarMax is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and HSBC Holdings 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 Holdings PLC are associated (or correlated) with CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and CarMax go up and down completely randomly.
Pair Corralation between HSBC Holdings and CarMax
Assuming the 90 days trading horizon HSBC Holdings PLC is expected to generate 0.57 times more return on investment than CarMax. However, HSBC Holdings PLC is 1.75 times less risky than CarMax. It trades about 0.19 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.08 per unit of risk. If you would invest 66,292 in HSBC Holdings PLC on September 24, 2024 and sell it today you would earn a total of 9,788 from holding HSBC Holdings PLC or generate 14.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
HSBC Holdings PLC vs. CarMax Inc
Performance |
Timeline |
HSBC Holdings PLC |
CarMax Inc |
HSBC Holdings and CarMax Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HSBC Holdings and CarMax
The main advantage of trading using opposite HSBC Holdings and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, CarMax 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 CarMax will offset losses from the drop in CarMax's long position.HSBC Holdings vs. Samsung Electronics Co | HSBC Holdings vs. Samsung Electronics Co | HSBC Holdings vs. Hyundai Motor | HSBC Holdings vs. Toyota Motor Corp |
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Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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