Correlation Between HSBC USA and HSBC MSCI

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

Diversification Opportunities for HSBC USA and HSBC MSCI

0.32

Correlation Coefficient

HSBC USA  HSBC MSCI

Weak diversification

The 3 months correlation between HSBC and HSBC is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding HSBC USA Sustainable and HSBC MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI Japan 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI Japan has no effect on the direction of HSBC USA i.e., HSBC USA and HSBC MSCI go up and down completely randomly.

Pair Corralation between HSBC USA and HSBC MSCI

Assuming the 90 days trading horizon HSBC USA Sustainable is expected to under-perform the HSBC MSCI. In addition to that, HSBC USA is 1.11 times more volatile than HSBC MSCI Japan. It trades about -0.12 of its total potential returns per unit of risk. HSBC MSCI Japan is currently generating about -0.01 per unit of volatility. If you would invest  3,768  in HSBC MSCI Japan on December 29, 2024 and sell it today you would lose (36.00) from holding HSBC MSCI Japan or give up 0.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

HSBC USA Sustainable  vs.  HSBC MSCI Japan

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 MSCI Japan

Risk-Adjusted Performance

Very Weak

Over the last 90 days HSBC MSCI Japan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HSBC MSCI 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 MSCI

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

The idea behind HSBC USA Sustainable and HSBC MSCI Japan 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.