Correlation Between HSBC Holdings and Travelers Companies
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Travelers Companies 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 Travelers Companies 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 The Travelers Companies, you can compare the effects of market volatilities on HSBC Holdings and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Travelers Companies.
Diversification Opportunities for HSBC Holdings and Travelers Companies
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and Travelers is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Travelers Companies go up and down completely randomly.
Pair Corralation between HSBC Holdings and Travelers Companies
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 0.91 times more return on investment than Travelers Companies. However, HSBC Holdings plc is 1.1 times less risky than Travelers Companies. It trades about 0.13 of its potential returns per unit of risk. The Travelers Companies is currently generating about 0.08 per unit of risk. If you would invest 76,171 in HSBC Holdings plc on September 26, 2024 and sell it today you would earn a total of 17,329 from holding HSBC Holdings plc or generate 22.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
HSBC Holdings plc vs. The Travelers Companies
Performance |
Timeline |
HSBC Holdings plc |
The Travelers Companies |
HSBC Holdings and Travelers Companies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HSBC Holdings and Travelers Companies
The main advantage of trading using opposite HSBC Holdings and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.The idea behind HSBC Holdings plc and The Travelers Companies 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.Travelers Companies vs. Capital One Financial | Travelers Companies vs. The Bank of | Travelers Companies vs. Monster Beverage Corp | Travelers Companies vs. CVS Health |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
Global Correlations Find global opportunities by holding instruments from different markets |