Correlation Between Supermarket Income and HSBC Holdings

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

By analyzing existing cross correlation between Supermarket Income REIT and HSBC Holdings PLC, you can compare the effects of market volatilities on Supermarket Income and HSBC Holdings 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 Supermarket Income with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Supermarket Income and HSBC Holdings.

Diversification Opportunities for Supermarket Income and HSBC Holdings

-0.72

Correlation Coefficient

Supermarket Income  HSBC Holdings

Pay attention - limited upside

The 3 months correlation between Supermarket and HSBC is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Supermarket Income REIT and HSBC Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings PLC and Supermarket Income 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 Supermarket Income REIT are associated (or correlated) with HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings PLC has no effect on the direction of Supermarket Income i.e., Supermarket Income and HSBC Holdings go up and down completely randomly.

Pair Corralation between Supermarket Income and HSBC Holdings

Assuming the 90 days trading horizon Supermarket Income REIT is expected to under-perform the HSBC Holdings. In addition to that, Supermarket Income is 1.13 times more volatile than HSBC Holdings PLC. It trades about -0.06 of its total potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.33 per unit of volatility. If you would invest  65,680  in HSBC Holdings PLC on October 8, 2024 and sell it today you would earn a total of  12,770  from holding HSBC Holdings PLC or generate 19.44% return on investment over 90 days.

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

Supermarket Income REIT  vs.  HSBC Holdings PLC

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supermarket Income REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Supermarket Income is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

HSBC Holdings PLC

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, HSBC Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Supermarket Income and HSBC Holdings

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

The idea behind Supermarket Income REIT and HSBC Holdings PLC 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..