Correlation Between HSBC USA and HSBC Emerging

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

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

Diversification Opportunities for HSBC USA and HSBC Emerging

0.28

Correlation Coefficient

HSBC USA  HSBC Emerging

Modest diversification

The 3 months correlation between HSBC and HSBC is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding HSBC USA Sustainable and HSBC Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Emerging Market and HSBC USA 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 USA Sustainable are associated (or correlated) with HSBC Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Emerging Market has no effect on the direction of HSBC USA i.e., HSBC USA and HSBC Emerging go up and down completely randomly.

Pair Corralation between HSBC USA and HSBC Emerging

Assuming the 90 days trading horizon HSBC USA Sustainable is expected to under-perform the HSBC Emerging. In addition to that, HSBC USA is 1.2 times more volatile than HSBC Emerging Market. It trades about -0.12 of its total potential returns per unit of risk. HSBC Emerging Market is currently generating about -0.01 per unit of volatility. If you would invest  1,474  in HSBC Emerging Market on December 29, 2024 and sell it today you would lose (15.00) from holding HSBC Emerging Market or give up 1.02% of portfolio value over 90 days.

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

HSBC USA Sustainable  vs.  HSBC Emerging Market

HSBC USA Sustainable

Risk-Adjusted Performance

Very Weak

Over the last 90 days HSBC USA Sustainable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

HSBC Emerging Market

Risk-Adjusted Performance

Very Weak

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

Pair Trading with HSBC USA and HSBC Emerging

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

The idea behind HSBC USA Sustainable and HSBC Emerging Market 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.