Correlation Between HSBC SP and SP 500

Can any of the company-specific risk be diversified away by investing in both HSBC SP and SP 500 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 SP and SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HSBC SP 500 and SP 500 VIX, you can compare the effects of market volatilities on HSBC SP and SP 500 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 SP with a short position of SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC SP and SP 500.

Diversification Opportunities for HSBC SP and SP 500

-0.7

Correlation Coefficient

HSBC SP  SP 500

Excellent diversification

The 3 months correlation between HSBC and VILX is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and SP 500 VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 VIX and HSBC SP 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 SP 500 are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 VIX has no effect on the direction of HSBC SP i.e., HSBC SP and SP 500 go up and down completely randomly.

Pair Corralation between HSBC SP and SP 500

Assuming the 90 days trading horizon HSBC SP 500 is expected to under-perform the SP 500. But the etf apears to be less risky and, when comparing its historical volatility, HSBC SP 500 is 9.76 times less risky than SP 500. The etf trades about -0.13 of its potential returns per unit of risk. The SP 500 VIX is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  186,620  in SP 500 VIX on December 22, 2024 and sell it today you would lose (20,514) from holding SP 500 VIX or give up 10.99% of portfolio value over 90 days.

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

HSBC SP 500  vs.  SP 500 VIX

HSBC SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days HSBC SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

SP 500 VIX

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 VIX are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SP 500 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HSBC SP and SP 500

The main advantage of trading using opposite HSBC SP and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC SP position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.

The idea behind HSBC SP 500 and SP 500 VIX 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.