Correlation Between Titan Company and HSBC SP

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

By analyzing existing cross correlation between Titan Company Limited and HSBC SP 500, you can compare the effects of market volatilities on Titan Company and HSBC SP 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 Titan Company with a short position of HSBC SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Company and HSBC SP.

Diversification Opportunities for Titan Company and HSBC SP

-0.79

Correlation Coefficient

Titan Company  HSBC SP

Pay attention - limited upside

The 3 months correlation between Titan and HSBC is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and HSBC SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC SP 500 and Titan Company 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 Titan Company Limited are associated (or correlated) with HSBC SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC SP 500 has no effect on the direction of Titan Company i.e., Titan Company and HSBC SP go up and down completely randomly.

Pair Corralation between Titan Company and HSBC SP

Assuming the 90 days trading horizon Titan Company is expected to generate 1.13 times less return on investment than HSBC SP. In addition to that, Titan Company is 1.75 times more volatile than HSBC SP 500. It trades about 0.06 of its total potential returns per unit of risk. HSBC SP 500 is currently generating about 0.12 per unit of volatility. If you would invest  312,179  in HSBC SP 500 on September 12, 2024 and sell it today you would earn a total of  168,511  from holding HSBC SP 500 or generate 53.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.99%
Values	Daily Returns

Titan Company Limited  vs.  HSBC SP 500

Titan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

HSBC SP 500

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC SP 500 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HSBC SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Titan Company and HSBC SP

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

The idea behind Titan Company Limited and HSBC SP 500 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.