Correlation Between HSBC Holdings and STORE ELECTRONIC

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

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

Diversification Opportunities for HSBC Holdings and STORE ELECTRONIC

-0.45

Correlation Coefficient

HSBC Holdings  STORE ELECTRONIC

Very good diversification

The 3 months correlation between HSBC and STORE is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and STORE ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE ELECTRONIC and HSBC Holdings 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 HSBC Holdings plc are associated (or correlated) with STORE ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE ELECTRONIC has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and STORE ELECTRONIC go up and down completely randomly.

Pair Corralation between HSBC Holdings and STORE ELECTRONIC

Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.38 times more return on investment than STORE ELECTRONIC. However, HSBC Holdings plc is 2.64 times less risky than STORE ELECTRONIC. It trades about 0.08 of its potential returns per unit of risk. STORE ELECTRONIC is currently generating about 0.03 per unit of risk. If you would invest  2,399  in HSBC Holdings plc on September 4, 2024 and sell it today you would earn a total of  2,001  from holding HSBC Holdings plc or generate 83.41% return on investment over 90 days.

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

HSBC Holdings plc  vs.  STORE ELECTRONIC

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. Despite nearly unsteady fundamental indicators, HSBC Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

STORE ELECTRONIC

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STORE ELECTRONIC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, STORE ELECTRONIC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HSBC Holdings and STORE ELECTRONIC

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

The idea behind HSBC Holdings plc and STORE ELECTRONIC 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 CEOs Directory module to screen CEOs from public companies around the world.