Correlation Between HSBC Holdings and VF Corp

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

Diversification Opportunities for HSBC Holdings and VF Corp

0.65

Correlation Coefficient

HSBC Holdings  VF Corp

Poor diversification

The 3 months correlation between HSBC and 0R30 is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and VF Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corp 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 VF Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corp has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and VF Corp go up and down completely randomly.

Pair Corralation between HSBC Holdings and VF Corp

Assuming the 90 days trading horizon HSBC Holdings is expected to generate 1.17 times less return on investment than VF Corp. But when comparing it to its historical volatility, HSBC Holdings PLC is 3.05 times less risky than VF Corp. It trades about 0.39 of its potential returns per unit of risk. VF Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,116  in VF Corp on October 12, 2024 and sell it today you would earn a total of  151.00  from holding VF Corp or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

HSBC Holdings PLC  vs.  VF Corp

HSBC Holdings PLC

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HSBC Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

VF Corp

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VF Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VF Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HSBC Holdings and VF Corp

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

The idea behind HSBC Holdings PLC and VF Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.