Correlation Between Multi Units and HSBC Emerging

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Can any of the company-specific risk be diversified away by investing in both Multi Units 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 Multi Units and HSBC Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multi Units Luxembourg and HSBC Emerging Market, you can compare the effects of market volatilities on Multi Units 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 Multi Units with a short position of HSBC Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Units and HSBC Emerging.

Diversification Opportunities for Multi Units and HSBC Emerging

MultiHSBCDiversified AwayMultiHSBCDiversified Away100%
0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Multi and HSBC is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Multi Units Luxembourg 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 Multi Units 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 Multi Units Luxembourg 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 Multi Units i.e., Multi Units and HSBC Emerging go up and down completely randomly.

Pair Corralation between Multi Units and HSBC Emerging

Assuming the 90 days trading horizon Multi Units Luxembourg is expected to under-perform the HSBC Emerging. But the etf apears to be less risky and, when comparing its historical volatility, Multi Units Luxembourg is 1.25 times less risky than HSBC Emerging. The etf trades about -0.04 of its potential returns per unit of risk. The HSBC Emerging Market is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,449  in HSBC Emerging Market on November 29, 2024 and sell it today you would earn a total of  81.00  from holding HSBC Emerging Market or generate 5.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Multi Units Luxembourg  vs.  HSBC Emerging Market

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0123456
JavaScript chart by amCharts 3.21.15SP5 HSEM
       Timeline  
Multi Units Luxembourg 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Multi Units Luxembourg are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Multi Units is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15JanFebFeb5757.55858.55959.56060.5
HSBC Emerging Market 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Emerging Market are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. 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.
JavaScript chart by amCharts 3.21.15JanFebFeb14.414.614.81515.2

Multi Units and HSBC Emerging Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.42-1.81-1.21-0.60.01010.611.221.822.43 0.10.20.30.40.50.60.7
JavaScript chart by amCharts 3.21.15SP5 HSEM
       Returns  

Pair Trading with Multi Units and HSBC Emerging

The main advantage of trading using opposite Multi Units and HSBC Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi Units 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 Multi Units Luxembourg 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.
Check out your portfolio center.
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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