Correlation Between HSBC Holdings and Partner Communications

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

Diversification Opportunities for HSBC Holdings and Partner Communications

0.79

Correlation Coefficient

HSBC Holdings  Partner Communications

Poor diversification

The 3 months correlation between HSBC and Partner is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Partner Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Partner Communications 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 Partner Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Partner Communications has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Partner Communications go up and down completely randomly.

Pair Corralation between HSBC Holdings and Partner Communications

Given the investment horizon of 90 days HSBC Holdings is expected to generate 15.64 times less return on investment than Partner Communications. But when comparing it to its historical volatility, HSBC Holdings PLC is 5.33 times less risky than Partner Communications. It trades about 0.08 of its potential returns per unit of risk. Partner Communications is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  385.00  in Partner Communications on September 4, 2024 and sell it today you would earn a total of  115.00  from holding Partner Communications or generate 29.87% 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.  Partner Communications

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 unsteady fundamental drivers, HSBC Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Partner Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Partner Communications are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Partner Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HSBC Holdings and Partner Communications

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

The idea behind HSBC Holdings PLC and Partner Communications 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..