Correlation Between International Business and HSBC MSCI

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

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

Diversification Opportunities for International Business and HSBC MSCI

0.27

Correlation Coefficient

International Business  HSBC MSCI

Modest diversification

The 3 months correlation between International and HSBC is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and HSBC MSCI WORLD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI WORLD and International Business 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 International Business Machines 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 WORLD has no effect on the direction of International Business i.e., International Business and HSBC MSCI go up and down completely randomly.

Pair Corralation between International Business and HSBC MSCI

Considering the 90-day investment horizon International Business Machines is expected to generate 1.8 times more return on investment than HSBC MSCI. However, International Business is 1.8 times more volatile than HSBC MSCI WORLD. It trades about 0.14 of its potential returns per unit of risk. HSBC MSCI WORLD is currently generating about 0.23 per unit of risk. If you would invest  20,595  in International Business Machines on October 6, 2024 and sell it today you would earn a total of  1,670  from holding International Business Machines or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.12%
Values	Daily Returns

International Business Machine  vs.  HSBC MSCI WORLD

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

HSBC MSCI WORLD

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC MSCI WORLD are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, HSBC MSCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with International Business and HSBC MSCI

The main advantage of trading using opposite International Business and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines and HSBC MSCI WORLD 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..