Correlation Between Scottish Mortgage and HSBC NASDAQ

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

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

Diversification Opportunities for Scottish Mortgage and HSBC NASDAQ

0.91

Correlation Coefficient

Scottish Mortgage  HSBC NASDAQ

Almost no diversification

The 3 months correlation between Scottish and HSBC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and HSBC NASDAQ Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC NASDAQ Global and Scottish Mortgage 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 Scottish Mortgage Investment are associated (or correlated) with HSBC NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC NASDAQ Global has no effect on the direction of Scottish Mortgage i.e., Scottish Mortgage and HSBC NASDAQ go up and down completely randomly.

Pair Corralation between Scottish Mortgage and HSBC NASDAQ

Assuming the 90 days trading horizon Scottish Mortgage Investment is expected to generate 1.23 times more return on investment than HSBC NASDAQ. However, Scottish Mortgage is 1.23 times more volatile than HSBC NASDAQ Global. It trades about 0.24 of its potential returns per unit of risk. HSBC NASDAQ Global is currently generating about 0.21 per unit of risk. If you would invest  80,319  in Scottish Mortgage Investment on September 4, 2024 and sell it today you would earn a total of  15,661  from holding Scottish Mortgage Investment or generate 19.5% return on investment over 90 days.

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

Scottish Mortgage Investment  vs.  HSBC NASDAQ Global

Scottish Mortgage

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Scottish Mortgage exhibited solid returns over the last few months and may actually be approaching a breakup point.

HSBC NASDAQ Global

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC NASDAQ Global are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HSBC NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Scottish Mortgage and HSBC NASDAQ

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

The idea behind Scottish Mortgage Investment and HSBC NASDAQ Global 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.