Correlation Between HSBC Holdings and Freeport McMoRan

Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Freeport McMoRan 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 Freeport McMoRan 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 Freeport McMoRan, you can compare the effects of market volatilities on HSBC Holdings and Freeport McMoRan 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 Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Freeport McMoRan.

Diversification Opportunities for HSBC Holdings and Freeport McMoRan

-0.85

Correlation Coefficient

HSBC Holdings  Freeport McMoRan

Pay attention - limited upside

The 3 months correlation between HSBC and Freeport is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 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 Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Freeport McMoRan go up and down completely randomly.

Pair Corralation between HSBC Holdings and Freeport McMoRan

Assuming the 90 days trading horizon HSBC Holdings PLC is expected to generate 0.48 times more return on investment than Freeport McMoRan. However, HSBC Holdings PLC is 2.06 times less risky than Freeport McMoRan. It trades about 0.2 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.09 per unit of risk. If you would invest  66,144  in HSBC Holdings PLC on September 22, 2024 and sell it today you would earn a total of  9,936  from holding HSBC Holdings PLC or generate 15.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

HSBC Holdings PLC  vs.  Freeport McMoRan

HSBC Holdings PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, HSBC Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Freeport McMoRan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HSBC Holdings and Freeport McMoRan

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

The idea behind HSBC Holdings PLC and Freeport McMoRan 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.