Correlation Between Hang Seng and Credit Agricole

Can any of the company-specific risk be diversified away by investing in both Hang Seng and Credit Agricole 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 Hang Seng and Credit Agricole into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hang Seng Bank and Credit Agricole SA, you can compare the effects of market volatilities on Hang Seng and Credit Agricole 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 Hang Seng with a short position of Credit Agricole. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Seng and Credit Agricole.

Diversification Opportunities for Hang Seng and Credit Agricole

0.89

Correlation Coefficient

Hang Seng  Credit Agricole

Very poor diversification

The 3 months correlation between Hang and Credit is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng Bank and Credit Agricole SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Agricole SA and Hang Seng 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 Hang Seng Bank are associated (or correlated) with Credit Agricole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Agricole SA has no effect on the direction of Hang Seng i.e., Hang Seng and Credit Agricole go up and down completely randomly.

Pair Corralation between Hang Seng and Credit Agricole

Assuming the 90 days horizon Hang Seng is expected to generate 2.12 times less return on investment than Credit Agricole. In addition to that, Hang Seng is 1.39 times more volatile than Credit Agricole SA. It trades about 0.13 of its total potential returns per unit of risk. Credit Agricole SA is currently generating about 0.38 per unit of volatility. If you would invest  689.00  in Credit Agricole SA on December 28, 2024 and sell it today you would earn a total of  229.00  from holding Credit Agricole SA or generate 33.24% return on investment over 90 days.

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

Hang Seng Bank  vs.  Credit Agricole SA

Hang Seng Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hang Seng showed solid returns over the last few months and may actually be approaching a breakup point.

Credit Agricole SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Agricole SA are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Credit Agricole showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hang Seng and Credit Agricole

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

The idea behind Hang Seng Bank and Credit Agricole SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.