Correlation Between Chrysalis Investments and HSBC Holdings

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

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

Diversification Opportunities for Chrysalis Investments and HSBC Holdings

0.65

Correlation Coefficient

Chrysalis Investments  HSBC Holdings

Poor diversification

The 3 months correlation between Chrysalis and HSBC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chrysalis Investments 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 Chrysalis Investments 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 Chrysalis Investments 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 Chrysalis Investments i.e., Chrysalis Investments and HSBC Holdings go up and down completely randomly.

Pair Corralation between Chrysalis Investments and HSBC Holdings

Assuming the 90 days trading horizon Chrysalis Investments is expected to generate 1.3 times more return on investment than HSBC Holdings. However, Chrysalis Investments is 1.3 times more volatile than HSBC Holdings PLC. It trades about 0.18 of its potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.14 per unit of risk. If you would invest  8,050  in Chrysalis Investments on September 2, 2024 and sell it today you would earn a total of  1,580  from holding Chrysalis Investments or generate 19.63% return on investment over 90 days.

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

Chrysalis Investments  vs.  HSBC Holdings PLC

Chrysalis Investments

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chrysalis Investments are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Chrysalis Investments unveiled solid returns over the last few months and may actually be approaching a breakup point.

HSBC Holdings PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HSBC Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chrysalis Investments and HSBC Holdings

The main advantage of trading using opposite Chrysalis Investments and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chrysalis Investments 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 Chrysalis Investments 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.