Correlation Between HSBC SP and Lyxor UCITS

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

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

Diversification Opportunities for HSBC SP and Lyxor UCITS

-0.66

Correlation Coefficient

HSBC SP  Lyxor UCITS

Excellent diversification

The 3 months correlation between HSBC and Lyxor is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding HSBC SP 500 and Lyxor UCITS Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS Daily and HSBC SP 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 SP 500 are associated (or correlated) with Lyxor UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor UCITS Daily has no effect on the direction of HSBC SP i.e., HSBC SP and Lyxor UCITS go up and down completely randomly.

Pair Corralation between HSBC SP and Lyxor UCITS

Assuming the 90 days trading horizon HSBC SP 500 is expected to generate 0.45 times more return on investment than Lyxor UCITS. However, HSBC SP 500 is 2.22 times less risky than Lyxor UCITS. It trades about 0.28 of its potential returns per unit of risk. Lyxor UCITS Daily is currently generating about -0.15 per unit of risk. If you would invest  5,081  in HSBC SP 500 on September 12, 2024 and sell it today you would earn a total of  748.00  from holding HSBC SP 500 or generate 14.72% return on investment over 90 days.

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

HSBC SP 500  vs.  Lyxor UCITS Daily

HSBC SP 500

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, HSBC SP sustained solid returns over the last few months and may actually be approaching a breakup point.

Lyxor UCITS Daily

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor UCITS Daily has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with HSBC SP and Lyxor UCITS

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

The idea behind HSBC SP 500 and Lyxor UCITS Daily 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.