Correlation Between HSBC Holdings and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Smithson Investment 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 Smithson Investment 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 Smithson Investment Trust, you can compare the effects of market volatilities on HSBC Holdings and Smithson Investment 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 Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Smithson Investment.
Diversification Opportunities for HSBC Holdings and Smithson Investment
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HSBC and Smithson is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust 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 Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Smithson Investment go up and down completely randomly.
Pair Corralation between HSBC Holdings and Smithson Investment
Assuming the 90 days trading horizon HSBC Holdings PLC is expected to generate 1.42 times more return on investment than Smithson Investment. However, HSBC Holdings is 1.42 times more volatile than Smithson Investment Trust. It trades about 0.14 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.05 per unit of risk. If you would invest 65,671 in HSBC Holdings PLC on September 2, 2024 and sell it today you would earn a total of 7,599 from holding HSBC Holdings PLC or generate 11.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
HSBC Holdings PLC vs. Smithson Investment Trust
Performance |
Timeline |
HSBC Holdings PLC |
Smithson Investment Trust |
HSBC Holdings and Smithson Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HSBC Holdings and Smithson Investment
The main advantage of trading using opposite HSBC Holdings and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.HSBC Holdings vs. Smithson Investment Trust | HSBC Holdings vs. TR Property Investment | HSBC Holdings vs. Herald Investment Trust | HSBC Holdings vs. Taylor Maritime Investments |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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