Correlation Between HSBC Holdings and Banco Bilbao

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

Diversification Opportunities for HSBC Holdings and Banco Bilbao

-0.12

Correlation Coefficient

HSBC Holdings  Banco Bilbao

Good diversification

The 3 months correlation between HSBC and Banco is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Banco Bilbao Viscaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Viscaya 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 Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Viscaya has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Banco Bilbao go up and down completely randomly.

Pair Corralation between HSBC Holdings and Banco Bilbao

Given the investment horizon of 90 days HSBC Holdings is expected to generate 1.16 times less return on investment than Banco Bilbao. But when comparing it to its historical volatility, HSBC Holdings PLC is 1.4 times less risky than Banco Bilbao. It trades about 0.09 of its potential returns per unit of risk. Banco Bilbao Viscaya is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  511.00  in Banco Bilbao Viscaya on September 3, 2024 and sell it today you would earn a total of  434.00  from holding Banco Bilbao Viscaya or generate 84.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HSBC Holdings PLC  vs.  Banco Bilbao Viscaya

HSBC Holdings PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, HSBC Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Banco Bilbao Viscaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bilbao Viscaya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Banco Bilbao is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HSBC Holdings and Banco Bilbao

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

The idea behind HSBC Holdings PLC and Banco Bilbao Viscaya 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.